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Liechtenstein’s Banking Regulation: A Focus on Prudent Management
In order to ensure the stability and integrity of its financial sector, Liechtenstein has implemented stringent regulations governing banking institutions. The country’s Financial Market Authority (FMA) is responsible for overseeing the activities of banks and other financial institutions, ensuring they operate in a prudent and sound manner.
Examination of Interested Acquirers
One key aspect of Liechtenstein’s regulatory regime is the examination of interested acquirers of bank shares to ensure their suitability and financial soundness. This process involves assessing factors such as:
- The identity of the proposed acquirer
- Shareholder structure
- Good repute and experience
- Financial soundness
- Potential risks related to compliance and money laundering, among others
Restrictions on Foreign Shareholdings
Liechtenstein has implemented specific restrictions on foreign shareholdings in banks, which are subject to the same regulations as domestic shareholders. There is no special regime for domestic or globally systemically important banks, but banks operating in Liechtenstein must comply with EU directives and regulations.
Sanctions for Non-Compliance
The FMA can impose sanctions on banks that violate banking regulations, including:
- Fines
- Imprisonment of up to three years
- Revocation or withdrawal of a bank’s license
- Dissolution of the institution
Resolution Regime for Banks
Liechtenstein has also implemented a resolution regime for banks, which includes a bail-in tool as a possible resolution mechanism. The country requires banks to hold gone-concern capital (TLAC) in line with EU regulations.
Client Asset Protection
The FMA requires banks to ensure adequate protection of deposits and investments by establishing separate organizations or participating in foreign protection schemes. The Deposit Guarantee and Investor Compensation Foundation PCC (EAS) was established to provide an autonomous solution for the protection of client assets.
Conclusion
In conclusion, Liechtenstein’s banking regulation is designed to promote prudent management and stability in the financial sector. While the country faces challenges related to its small size and rapid regulatory development, it remains committed to international standards and has implemented measures to attract a qualified workforce to ensure the continued success of its financial sector.
Interview with Dr. iur. Manuel Walser, LL.M., Attorney at Law
Dr. Walser highlights the importance of Liechtenstein’s international orientation in shaping bank regulation, citing the country’s commitment to EU directives and global standards. He also notes that FinTech and digitalization are topical matters for the FMA, which must balance its supervisory activity with the needs of the private banking sector.
Biggest Threats
The biggest threat to the success of Liechtenstein’s financial sector is the rapid regulatory development, which requires a highly qualified workforce to remain competitive.