Switzerland’s Regulatory Framework for Financial Institutions Under Review
Zurich, Switzerland - Switzerland’s financial regulatory framework is undergoing significant changes in response to the global financial crisis and the need for increased competitiveness. The country’s Financial Market Supervisory Authority (FINMA) has implemented a range of reforms aimed at strengthening the stability of the financial system and promoting innovation.
New Regulatory Framework
In 2020, FINMA adopted the Ordinance on Financial Institutions, which introduced new regulations for banks, Fintechs, and other financial institutions. The ordinance aimed to improve the resilience of the financial sector and enhance consumer protection. Additionally, FINMA revised the Collective Investment Schemes Act (CISA), introducing a new category of qualified investor funds exempt from FINMA authorization.
Systemically Important Banks
Switzerland has taken a proactive approach to regulating systemically important banks (SIBs). The country requires these institutions to maintain stringent capital and liquidity ratios, as well as develop resolution plans. In the event of a crisis, FINMA can impose a “bail-in” on unsecured claims, ensuring that creditors bear some of the losses.
Fintech
The Swiss regulatory framework has been relaxed for Fintech providers, including:
- Crowdfunding platforms
- Electronic payment services
- Robo-advisors
- Providers of interest-free accounts for settlement purposes (exempt from banking licence requirements if holding deposits for less than 60 days)
- Firms accepting deposits up to CHF 1 million without conducting an interest margin business (can opt out of FINMA supervision)
New Fintech Licence
FINMA introduced a new Fintech licence in 2019, which offers more lenient requirements compared to the fully fledged banking licence. This licence applies to institutions holding deposits below CHF 100 million and is designed to create an innovation space for Fintech companies.
Future Developments
The Swiss Federal Council has proposed introducing a Public Lending Facility (PLF) toolkit to provide extraordinary liquidity support in times of crisis. Additionally, FINMA is reviewing its regulations to ensure they remain effective and proportionate to the risks posed by financial institutions.
As Switzerland continues to navigate the complexities of the global financial landscape, its regulatory framework will play a crucial role in promoting stability, innovation, and competitiveness.