Financial Crime World

Switzerland Tightens Regulations on Foreign Control of Banks

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In a move to safeguard the stability and integrity of the Swiss banking sector, the country’s government has introduced new regulations aimed at preventing foreign entities from exerting direct or indirect control over local banks.

Key Provisions

  • Any bank with a significant stake in a company outside the financial or insurance sectors must not exceed 15% of its capital.
  • The total value of such equity interests cannot exceed 60% of the bank’s capital.
  • Banks must maintain adequate capital and liquidity both at the single entity and consolidated levels, as determined by the Swiss Federal Council.
  • Loans or equity interests to governing bodies, significant shareholders, related persons, or affiliated companies are prohibited unless adhering to generally accepted principles of the banking industry.

Impact on Banks with Parent Companies

  • Banks with parent companies supervised by a foreign banking or financial market supervisory authority will be required to transmit information and documents not publicly available for consolidated supervision purposes, provided certain conditions are met.
  • These banks may also be subject to a maximum amount set by FINMA on a case-by-case basis if deemed necessary due to the risks involved in transactions involving crypto-based assets.

Background

The Swiss Federal Act on Banks and Savings Banks was first introduced in 1971, with subsequent revisions aimed at strengthening the country’s banking sector. The latest amendments reflect the evolving landscape of the global financial industry, including the growing importance of crypto-based assets and concerns over foreign control of local banks.

Why the Revisions?

The Swiss government has emphasized the importance of ensuring that Swiss banks operate under robust regulatory frameworks, protecting the interests of both local citizens and international investors. The revised regulations are aimed at maintaining Switzerland’s reputation as a trusted and stable financial hub.

By implementing these new regulations, Switzerland is taking a proactive approach to safeguarding its banking sector and upholding its commitment to transparency, stability, and integrity in the global financial system.