Regulation of Banking Activities in Liechtenstein
Introduction
The Financial Market Authority (FMA) of Liechtenstein plays a crucial role in regulating banking activities and ensuring compliance with applicable laws and regulations. This overview outlines the key aspects of banking regulation, customer relationships, cross-border banking activities, and dispute resolution mechanisms in Liechtenstein.
Initial Capital Requirements
According to Article 24 paragraph 2 of the Banking Act (BankG), a bank or investment firm must have an initial capital of at least 1 million Swiss francs or its equivalent in euros or US dollars. The FMA has discretion to reduce the initial capital under specific circumstances, taking into account the nature and scope of the business.
Key Points
- Initial capital requirement: 1 million Swiss francs (or equivalent)
- FMA may reduce initial capital under certain circumstances
- Discretionary power based on business scope and nature
Rules Governing Bank-Customer Relationships
The Liechtenstein Civil Code (ABGB) governs the relationship between banks, customers, and third parties. The contract of mandate is commonly used in banking transactions.
Key Principles
- Agent (bank or investment firm) must act diligently and honestly on behalf of the principal
- Exceeding authority may lead to liability for consequences
- Contract of mandate used in banking transactions
General Terms and Conditions
Liechtenstein banks typically have their own General Terms and Conditions that outline the terms of their relationship with customers.
Validity Criteria
- Unusual provisions not binding unless explicitly disclosed
- Provisions causing substantial imbalance in contractual rights and obligations are void
Consumer Protection Act (KSchG)
The KSchG contains more favorable provisions for customers than the ABGB. In cases of conflict between the two laws, the KSchG takes precedence.
Key Points
- More favorable provisions for customers
- KSchG takes precedence in cases of conflict with ABGB
Cross-Border Banking Activities
A bank may only conduct banking activities in Liechtenstein with a license issued by the FMA. Under the freedom to provide services, banks from EEA countries may also operate in Liechtenstein provided they notify the FMA beforehand (passport).
Key Points
- License required for banking activities
- Freedom to provide services allows EEA country banks to operate with notification
Dispute Resolution
The ordinance of 27 October 2009 introduced an extrajudicial conciliation board that supersedes the bank ombudsman. The conciliation board may be called upon to settle disputes between customers and banks, acting as a mediator to encourage discussions and lead parties to a mutually acceptable solution.
Key Points
- Extrajudicial conciliation board introduced
- Conciliation board acts as mediator in dispute resolution