Regulatory bodies all over the world continue to address issues that became apparent in the financial crisis. The beginning of the New Year is a good point in time to take stock of all the regulations which has entered into force on 1 January 2015, and of regulations in discussion during 2015.
New laws and guidelines that enter into force on 1 January 2015
Banking Act – Amendment regarding dormant accounts
Under the current regime, assets on dormant accounts have to be liquidated by specialized financial institutions. As of 1 January 2015, the amended regulations no longer require liquidation through specialised financial institutions: After 50 years, banks can themselves liquidate dormant accounts related to a beneficial owner with a balance exceeding CHF 500 in total, provided that they have previously made a public call to identify any entitled persons, and no such person has contacted the bank. If the balance on accounts related to a beneficial owner is below CHF 500, banks can liquidate the assets after 50 years without a public call. With the liquidation of the account all claims of an entitled person will vanish and the liquidation proceeds will fall to the Swiss Federation. The Swiss Bankers Association issued guidelines further specifying and operationalising the amended regulations regarding dormant accounts, which have been recognized by FINMA in December 2014, and will also enter into force on 1 January 2015.
Banking Ordinance – Total revision
In view of the adaption of the new reporting and accounting law and the above mentioned stipulation of the liquidation of assets on dormant accounts, the Banking Ordinance has been fully revised. Besides some formal and editorial changes, the provisions on liquidity for banks have been transferred to the Liquidity Ordinance for banks. In addition, the minimum structure for the annual financial statement is set forth in the appendix of the revised Banking Ordinance.
Liquidity Ordinance for banks – Partial revision
The revision of the 2012 introduced Liquidity Ordinance for banks focuses on the implementation of quantitative liquidity requirements defined by the Basel Committee on Banking Supervision, which were not yet published at the time of redaction of the ordinance. The aim of the introduction of the Liquidity Coverage Ratio is to ensure that banks are able to survive stress situations, such as very substantial withdrawals of client deposits or difficulties with securing refinancing on the capital market for at least 30 days. In such events, the banks need to have sufficient high-quality liquid assets.
FINMA Collective Investment Schemes Ordinance (CISO-FINMA) – Total revision
The amendment of FINMA’s ordinance on collective investment schemes completes the partial revision of the Collective Investment Schemes Act (CISA) and its respective Ordinance (CISO) that entered into force on 1 May 2013. Mainly implementing changes in both national and international regulatory standards, the CISO-FINMA sets out to substantiate the provisions stipulated in the CISA and the CISO. Aligning the risk measurement of derivative financial instruments with Europe’s UCITS directive, the amendment of the CISO-FINMA aims to enhance investor protection and is intended to facilitate EU market access.
FINMA Circulars 15/1 “Accounting – banks”, 15/2 “Liquidity risks banks”, 15/3 “Leverage Ratio“ and 08/22 „Capital adequacy disclosure – banks“
In adaption of the international regulatory frame-work for banks (Basel III), FINMA has recently published three new and one amended circular that will all enter into force on 1 January 2015.
- FINMA circular 15/1 sets forth the accounting standards for banks with consideration of the characteristics of the banking business.
- FINMA circular 15/2 governs the qualitative minimum requirements with regards to liquidity risk management and defines quantitative requirements for the quota on short term liquidity (Liquidity Coverage Ratio, LCR).
- FINMA Circular 15/3 defines the calculation of the Leverage Ration according the Basel III minimum standards and elaborates the provisions set out in the Ordinance on Capital Resources.
- The changes made to FINMA circular 08/22 concern the disclosure of the Leverage Ratio and Liquidity Coverage Ratio.
Projects in the legislative pipeline
Automatic Exchange of Information (AEoI)
Considering that all important financial centers are focusing on increasing tax transparency, Switzerland’s Federal Council on 19 November 2014 expressed its intent to be part of the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA), which is another step towards setting AEoI as global standard. This agreement was concluded by 51 states at the Global Forum in Berlin on 29 October 2014. As opposed to this so-called Early Adopters Group intending to apply the Automatic Exchange of Information as of 1 January 2016 and the first reporting in September 2017, Switzerland will – due to the political process – most likely adopt the new regime by 1 January 2017, with first reporting in September 2018. The expected timeline should encourage holders of Swiss bank accounts to fully comply with the tax obligations of their country of residence at the latest by end of 2015.
Federal Financial Services Act (FFSA/FIDLEG) and Financial Institutions Act (FinIA/FINIG)
The consultation period for the FFSA and the FinIA was closed at the end of October 2014. After the drafts submitted for publication was publicly announced by the Swiss Federal Council, many stakeholders of the Swiss financial market expressed their view in the media and/or sent their input to the administration during the consultation period. First evaluations of the feedback by the Federal Department of Finance show that the FFSA and the FinIA are, in principle, welcomed in the industry, but that topics like the “Weissgeldstrategie“ (strategy for legitimate money), the fund for procedural costs of clients of financial institutions or the reversal of evidence raise concerns in the industry. Next steps will be the public statement of the Swiss Federal Council, which is expected for the first quarter of the year 2015, and the discussion in the Swiss parliament, which is scheduled for fall 2015.
AML / Implementation of FATF guidelines
Following the recommendations of the Financial Action Task Force (FATF), the Swiss Federal Council has published its public statement with regards to the revision of the Anti-Money Laundering Law, which was recently discussed in both the Council of States and the National Council during the winter session 2014. At the center of the discussion were proposed changes like the increased transparency of legal persons in connection with bearer shares, the extension of the term of politically exposed persons [PEP] to include Swiss natives and members of intergovernmental agencies, the introduction of predicate offenses in the area of direct taxes, and the prohibition of cash payments in excess of CHF 100,000. Implementation of the new provisions is expected by end of 2015/early 2016, followed by the FATF country exam in spring 2016.
- Circulars of FINMA
- Voluntary disclosures
- AEoI – It is time to regularize undeclared accounts
- Automatic Exchange of Information bei KPMG
- Liquidity Ordinance at KPMG
- Regulatory Competence Center at KPMG