Regulatory Requirements for Banks in Switzerland: Corporate Governance, Supervision, and Organization
I. Corporate Governance Requirements
The following are key aspects of corporate governance in Swiss banks.
Board of Directors
- The board must consist of at least three members, with one third being independent.
- No member can be part of the executive management unless an exception is granted by FINMA.
Executive Management
- Responsible for conducting operational activities according to the strategy, targets, and internal regulations set forth by the board.
- Must have adequate management expertise and specialist knowledge in banking and financial services.
Risk Management Framework and Internal Control System
- Adopted and maintained institution-wide to define risk policy and tolerance.
- Ensures that all risks are identified, assessed, and managed within the bank’s risk appetite.
Internal Audit
- Must have a function reporting directly to the board of directors with an unlimited right of inspection, information, and audit.
II. Registration and Oversight of Senior Management
The following requirements apply to senior management in Swiss banks:
Board of Directors
- Must have adequate management expertise and specialist knowledge and experience in banking and financial services.
- Ensures that the bank operates within licensing requirements.
Executive Management
- Must have adequate management expertise and specialist knowledge required to ensure compliance with licensing requirements.
- Each member must maintain a good reputation and fulfill the “fit and proper” requirements.
III. Remuneration Requirements
The following remuneration requirements apply to Swiss banks:
Compensation System for Independent Control Bodies
- The board of directors defines the requirements for its members, chairman, and committee members.
- Ensures that remuneration is fair and in line with market standards.
Executive Management Compensation
- The chief executive officer’s requirements are defined by the board, which also approves and periodically reviews the requirements for other members.
IV. Additional Requirements
The following additional requirements apply to Swiss banks:
Auditor Independence
- The internal audit function can be internalised or delegated to an external audit firm independent from the bank’s regulatory audit firm.
- Ensures that audits are conducted impartially and in accordance with auditing standards.
Organizational Requirements
- Depending on the type of activities conducted, banks face numerous organizational requirements.
- These may include compliance with laws and regulations, risk management, and internal control.