Swiss Franc Payment Transactions Face New Challenges
The use of Swiss franc payment transactions by financial intermediaries in Liechtenstein is facing new challenges due to the country’s membership in both the Swiss franc currency area and the European Economic Area (EEA). This poses a significant risk for financial institutions operating in the region.
Challenges Ahead
- Access to service providers or infrastructures in third countries is becoming increasingly restricted, requiring equivalence decisions from the European Commission.
- The broken-off negotiations between Switzerland and the EU on an institutional framework agreement are also having a blocking effect on pending equivalence decisions.
- Financial intermediaries in Liechtenstein may face difficulties in using Swiss infrastructure without an equivalence decision from the European Commission.
Vaduz Convention Provides Relief
The Vaduz Convention, signed in 2002, has helped to resolve many of the issues arising from Switzerland’s non-membership in the EEA. The convention provides for cooperation between Switzerland and the EFTA states (Norway and Iceland) on trade in goods and services, as well as investments.
Banking Acts and Laws
In Liechtenstein, banking activities are governed by a range of main acts and laws, including:
- Banking Act (BA)
- Banking Ordinance
- Act on Financial Market Supervision
- Others
These acts and laws provide a framework for banks to operate within the country, while also implementing EU standards.
Banking Association Guidelines
The Liechtenstein Bankers Association has issued its own guidelines and directives in recent years, which some believe may be overly regulatory. While these guidelines are intended to promote best practices among member banks, they could potentially undermine the authority of the Financial Market Authority Liechtenstein (FMA).
Licences Required for Payment Services
In addition to the main banking acts and laws, financial market participants in Liechtenstein must also hold special licences for payment services, e-money, and other activities. Banking licences are the most comprehensive licence, allowing banks to engage in a range of activities without additional licenses.
Conclusion
The use of Swiss franc payment transactions by financial intermediaries in Liechtenstein is facing new challenges due to the country’s membership in both the Swiss franc currency area and the EEA. While the Vaduz Convention has provided relief, it is clear that further cooperation between Switzerland and the EU is needed to resolve these issues.