Financial Crime World

Switzerland’s Strict Rules for Foreign-Controlled Banks

=====================================================

In a move to maintain the country’s financial stability and integrity, Switzerland has introduced strict regulations for banks with foreign control. According to Article 2 of the Swiss Federal Act on Banks and Savings Banks, any bank with more than 50% foreign ownership is considered foreign-controlled.

Regulatory Requirements

Foreign-controlled banks must submit regular reports to the Swiss Financial Market Supervisory Authority (FINMA), detailing their operations, risks, and financial situation. They are also subject to on-site inspections and audits by FINMA to ensure compliance with the regulations.

  • Increased capital buffers: Foreign-controlled banks are required to maintain a minimum capital ratio of 10%, compared to 8% for domestic banks.
  • Stricter risk management practices: The goal is to ensure that these institutions operate safely and efficiently, without posing a threat to Switzerland’s financial system.

Marketing Restrictions

Article 4 quater of the Act prohibits foreign-controlled banks from engaging in misleading or obtrusive marketing campaigns that could confuse customers about their Swiss domicile or association with Swiss institutions. This restriction aims to maintain transparency and prevent confusion among customers.

  • No misleading or obtrusive marketing: Foreign-controlled banks are prohibited from using marketing tactics that might mislead or confuse customers.
  • Transparency is key: The goal is to ensure that customers understand the true nature of the bank’s foreign control and any potential risks involved.

Data Transmission and Confidentiality

The regulations also address the transmission of sensitive information between foreign-controlled banks and their parent companies. Article 4 quinquies permits the exchange of confidential data, provided it is used exclusively for internal control or direct supervision purposes, and subject to official secrecy or professional confidentiality obligations.

  • Formal decision: Banks can request a formal decision from FINMA prior to transmitting sensitive information in cases where there is doubt about its permissibility.
  • Confidentiality ensured: The regulations ensure that any sensitive information transmitted between foreign-controlled banks and their parent companies is handled in accordance with Swiss financial regulatory standards.

Crypto-Asset Management

The Act also contains provisions for the management of crypto-based assets held by foreign-controlled banks as safe-custody assets for custody clients. Article 4 sexies allows FINMA to set a maximum amount on a case-by-case basis, taking into account the risks inherent in the transaction and factors such as the function of the crypto-assets, their underlying technologies, and risk mitigation strategies.

  • Case-by-case basis: FINMA sets a maximum amount for the management of crypto-based assets, taking into account various factors and risks.
  • Risk management: The regulations ensure that foreign-controlled banks manage crypto-based assets in a safe and responsible manner.

Conclusion

==========

Switzerland’s strict regulations for foreign-controlled banks aim to maintain the country’s financial stability while also ensuring that these institutions operate safely and efficiently. The new rules demonstrate Switzerland’s commitment to upholding high standards of financial regulation and supervision, both domestically and internationally.