How are banks regulated?
Banks are primarily regulated by the Banking Act and associated ordinances. Banks require a licence from FINMA for their activities and are supervised by FINMA on an ongoing basis. The Banking Act essentially stipulates the conditions for obtaining a licence, the requirements for own funds and liquidity, a number of conduct obligations as well as provisions relating to restructuring and bankruptcy proceedings for banks.
Are banks as financial institutions regulated by the FinIA?
No. Banks will continue to be regulated by the Banking Act. Unlike, for example, securities dealers, banks are excluded from the scope of the FinIA.
Have the provisions of the Banking Act applicable to banks been amended as part of the FinSA&FinIA legislative project?
The Federal Council originally intended to use the legislative project as an opportunity to revise the wording of the Banking Act and to make certain clarifications. However, this initiative was rejected by Parliament. Therefore, apart from a number of new provisions for banks organised as cooperatives, the provisions applicable to banks in the Banking Act were not amended.
Under what conditions is the FinSA applicable to banks?
The FinSA applies to «financial service providers» (Art. 2 para. 1 let. a FinSA). Generally, this term covers persons providing financial services on a professional basis.
The «classic» banking business, which consists of receiving (savings) deposits on the one hand (deposit-taking business) and granting loans on the other hand (lending business), is not regarded as a financial service within the meaning of the FinSA. Accordingly, the new provisions of the FinSA do not cover the maintenance of accounts or the safekeeping of assets. The granting of loans is also normally not covered by the FinSA.
In contrast, the securities trading and brokerage activities of banks are deemed to be financial services within the meaning of the FinSA (Art. 3 let. c para. 1 and 2 FinSA). Furthermore, the FinSA applies to banks that provide investment advisory and asset management services (Art. 3 let. c para. 3 and 4 FinSA). Finally, banks may also fall within the scope of the FinSA if they grant loans to clients for the execution of transactions with financial instruments. Therefore, the FinSA is particularly applicable to the Lombard credit business of banks (Art. 3 let. c para. 5 FinSA).
What are the obligations of banks under the FinSA?
When banks provide financial services, they must comply with all obligations under the FinSA (cf. «FinSA»). The duties include:
- the implementation of a client segmentation (Art. 4 para. 1 FinSA)
- compliance with the rules of conduct according to FinSA, such as the duty to provide information and the duty to perform adequacy and suitability tests; Under certain conditions, banks must provide retail clients with a Basic Information Sheet (see: «Basic Information Sheets»);
- the fulfilment of organisational requirements including the correct handling of actual or potential conflicts of interest;
- the obligation to hand over documents (Art. 72 f. FinSA);
- affiliation with an ombudsman (Art. 77 f. FinSA).
Where is the main need for action for banks with regard to the FinSA?
Many of the duties laid down in the FinSA are, in principle, also applicable to banks pursuant to private law. However, in contrast to previous court practice in the field of private law, which was only setting forth general principles, the FinSA regulates the required conduct in extensive detail.
Against this background, the main action required of many banks is likely to be the need to document more in writing. The obligation to provide a Basic Information Sheet is also a new requirement. However, for banks that have implemented MiFID II already, the implementation efforts for FinSA will be limited.