Switzerland Tightens Regulations on Financial Institutions
The Swiss Financial Market Supervisory Authority (FINMA) has introduced stricter regulatory requirements for banks, securities firms, and foreign institutions operating in Switzerland. These new rules aim to enhance financial stability and protect investors.
Banks and Securities Firms Must Comply with Stringent Requirements
As of January 1, 2019, companies that accept public deposits up to CHF 100 million or solicit such deposits without investing or paying interest will no longer be defined as banks. However, these institutions will need to obtain a FinTech license, which comes with less stringent requirements.
Key Requirements for Banks and Securities Firms
- Any business that involves accepting deposits from the public on a professional basis or publicly advertising such activity requires a banking license.
- Financing activities, refinancing, and other related services also necessitate a license.
Exceptions Apply
The Banking Ordinance provides for exceptions to the ban on accepting deposits from the public on a professional basis. Companies that accept public deposits up to CHF 1 million without operating in the interest rate differential business (sandbox) are exempt from holding a banking license, provided they inform investors about the lack of FINMA supervision and deposit protection.
Securities Firms Must Obtain Licenses for Various Activities
The Financial Institutions Act requires licenses for various forms of securities trading, including:
- Dealing
- Market making
- Issuing houses
- Derivatives firms
- Organized trading facilities
Foreign Banks and Securities Firms Need Licenses to Operate in Switzerland
Branches and representative offices of foreign banks and securities firms must obtain a license from FINMA if they employ staff in Switzerland who carry out transactions, trade securities, or manage client accounts on behalf of the institution. Representative offices also require a license for advertising purposes.
FINMA’s Licensing Activities
FINMA is responsible for issuing new licenses, processing requests for changes to existing licenses, and lifting licensing requirements when necessary. The authority takes measures against companies and individuals operating without the requisite license, including liquidation, to restore compliance with the law.
The new regulations aim to enhance financial stability and protect investors in Switzerland. Financial institutions must ensure they comply with the stringent requirements set by FINMA to avoid penalties and maintain their licenses.