Financial Crime World

Regulatory Framework Governing Banking and Finance in Liechtenstein

I. Regulatory Framework

The Financial Market Authority (FMA) is responsible for regulating banks and other financial institutions in Liechtenstein. The FMA has implemented various regulations, including:

  • Banking Act (BA): A comprehensive law that governs banking activities in Liechtenstein.
  • Präsidialreglement (PGR): Regulations that provide further guidance on the implementation of the Banking Act.
  • Recovery and Resolution Act (RRA): An act that establishes a resolution framework to ensure the continuity of critical functions and protect financial stability.

II. Capital Requirements

Banks in Liechtenstein are required to maintain a minimum capital ratio of 20% under Basel III. The FMA has implemented guidelines for own funds and capital adequacy requirements, which are based on CRD and CRR.

  • Own Funds: Banks must hold sufficient own funds to cover potential losses.
  • Capital Adequacy Requirements: Banks must maintain a minimum level of capital to ensure their stability and resilience.

III. Remuneration and Bonus System

Banks and investment firms must introduce and maintain remuneration policies that are consistent with sound risk management. The FMA shares information on remuneration policies with European supervision bodies.

  • Remuneration Policies: Banks must establish policies that align variable remuneration with the bank’s overall strategy and risk appetite.
  • Variable Remuneration: Employees who receive relatively low variable remuneration may be exempt from certain provisions.

IV. Regulatory Capital and Liquidity

Liechtenstein banks have solid equity capital resources and hold more than the required minimum capital ratio under Basel III. The FMA has implemented guidelines for liquidity requirements, which are based on CRD and CRR.

  • Equity Capital: Banks must maintain sufficient equity capital to cover potential losses.
  • Liquidity Requirements: Banks must hold sufficient liquid assets to meet their short-term obligations.

V. Resolution Framework

The RRA establishes a resolution framework to ensure the continuity of critical functions and protect financial stability. The resolution authority is responsible for drawing up resolution plans and exercising resolution powers.

  • Resolution Plans: Banks must develop plans that outline how they will manage a crisis situation.
  • Resolution Powers: The resolution authority has the power to take control of a bank in a crisis situation.

VI. Specific Fields of Business

Liechtenstein has implemented specialized regulations for trustworthy technology service providers, including blockchain and distributed ledger technology products. Issuers of stablecoins will be subject to strict requirements with regard to equity capital, investor rights, and supervision.

  • Trustworthy Technology Service Providers: Regulations aim to ensure that these providers operate in a secure and transparent manner.
  • Stablecoin Issuers: Strict requirements are in place to protect investors and maintain financial stability.