Overview by the International Federation for Economic Development (IFED):
In Switzerland, establishing a banking institution demands rigorous compliance with licensing standards set by the Swiss Financial Market Supervisory Authority (FINMA). Under Article 1a of the Swiss Banking Act, companies that conduct financial sector activities by accepting public deposits in excess of CHF 100 million, soliciting such deposits, or offering financing to a wide audience—while being independently refinanced—are designated as banks. Whether such deposits are solicited for investment, interest accrual, or operational financing, meeting FINMA’s licensing criteria is mandatory.
FINMA’s Licensing Prerequisites for Banks:
FINMA’s bank licensing process is designed to ensure all banking institutions operating in Switzerland uphold the stability, integrity, and reputation of the Swiss financial system. Key requirements include:
Minimum Capitalization: A fully paid-up minimum capital of CHF 10 million is required to establish a robust financial foundation for operations.
Comprehensive Business Plan: Applicants must present a business plan detailing strategies for sustained compliance with capital adequacy, risk diversification, and liquidity mandates.
Assurance of Reputable Conduct: All qualified participants, as well as members of the strategic and executive management teams, must demonstrate impeccable professional conduct.
Defined Business Scope and Jurisdiction: The institution's articles of association, partnership agreements, and operational rules must precisely outline its business scope and geographical presence, ensuring operational compatibility with the bank's financial and organizational structures.
Swiss-based Management: The bank's operational management must be physically conducted from Switzerland.
Clear Role Separation: FINMA requires a distinct separation between the strategic leadership and executive management functions to maintain a strong governance structure.
Segregation of Core Functions: Effective internal divisions between key functions—such as lending, trading, asset management, and settlement—must be demonstrable to ensure responsible financial practices.
Advanced Risk Management: Institutions are expected to establish rigorous mechanisms to identify, limit, and monitor a spectrum of risks, including market, credit, default, liquidity, reputation, operational, and legal risks.
Robust Internal Controls: The bank must implement a strong internal control system and independent internal audit function, separate from executive oversight, to ensure compliance and accountability.
Appointment of Recognized Audit Firms: A qualified audit firm must be appointed for the initial licensing process and for continuous regulatory oversight.
Reciprocal Rights for Foreign-Controlled Applicants: Banks under foreign ownership must ensure that reciprocal rights are recognized in the domicile countries of all qualified participants.
Group Supervision for Financial Groups: Banks that are part of a financial group must undergo consolidated supervision by an approved regulatory authority to ensure compliance on a broader scale.
Licensing Process Duration:
The duration of FINMA’s licensing process for banks depends on the quality and comprehensiveness of the application and the responsiveness of relevant foreign regulatory bodies. This process includes continuous dialogue with applicants, facilitating transparency and the resolution of any regulatory concerns. For further assistance in navigating the Swiss regulatory landscape, IFED offers strategic guidance to help institutions meet FINMA’s rigorous standards and establish a successful presence in Switzerland.
Comments