Companies accepting Deposits from the Public / “Fintech” Companies
What are "deposits from the public"?
Deposits from the public are basically liabilities that a person enters into with its clients. According to the Federal Supreme Court, a company accepts deposits from the public if it enters into obligations with third parties and, by doing so, itself becomes the repayment debtor of the respective liabilities. Art. 5 para. 2 and 3 of the Banking Ordinance lists a number of exceptions to the term of «deposits from the public». FINMA specified these exceptions in greater details in its Circular 2008/3 «Deposits from the public with non-banks». In the event that no such exception applies, liabilities as described above are deemed to be deposits from the public.
When is the acceptance of deposits from the public carried out "commercially"?
The acceptance of deposits from the public is carried out commercially if a person continuously receives more than 20 deposits from the public or publicly recommends itself for the acceptance of deposits from the public (Art. 6 para. 1 Banking Ordinance).
How are companies that commercially accept deposits from the public regulated?
According to the Banking Act, the commercial acceptance of deposits from the public is reserved for institutions with a banking licence. On 1 August 2017, this prohibition on the acceptance of deposits from the public by non-banks was relaxed somewhat for the first time. Since then, the acceptance of deposits from the public within the framework of the so-called regulatory «sandbox» has been permitted up to a maximum value of CHF 1 million without the need for a banking licence under certain conditions (cf. below: «Under what conditions does the regulatory «sandbox» apply?»). This reduction of regulatory hurdles is intended to promote the development of innovative business models in the financial sector, e.g. crowdfunding.
How has FinSA&FinIA change the regulatory framework for the acceptance of deposits from the public?
With the FinSA&FinIA legislative project, a new Art. 1b was inserted in the Banking Act. According to this provision which is titled «promotion of innovation», the Banking Act applies analogously only to persons who accept deposits from the public up to a maximum value of CHF 100 million under certain circumstances. This revision created a new licence category with simplified requirements (in addition to the existing banking licence). Since the implementation of Art. 1b of the Banking Act also aimed to promote new business models in the financial sector, the new licence category with simplified requirements is often referred to as the «Fintech» licence.
Under what conditions does the regulatory "sandbox" apply?
According to Art. 6 para. 2 Banking Ordinance, a person does not accept public deposits commercially if it:
- receives deposits from the public with a total maximum value of CHF 1 million;
- does not engage in the interest margin business; and
- informs depositors in writing before making the deposit that it is not supervised by FINMA and that the deposits are not covered by the deposit guarantee.
As long as all three of these requirements are met, one moves within the regulatory «sandbox». Consequently, one does not need to obtain a «Fintech» licence or a banking licence.
Under what conditions can someone request a «Fintech» licence?
A «Fintech» licence can be requested by anyone who:
- accepts deposits commercially from the public with a total maximum value of CHF 100 million; and
- neither invests the deposits nor pays interest on the deposits received.
In the event that only one of these two conditions is met, a «traditional» banking licence must still be requested.
Does someone have to pursue an innovative business model in the «Fintech» area to obtain a «Fintech» licence from FINMA?
No. Even though the new licence category is generally referred to as the «Fintech» licence and Art. 1b of the Banking Act is titled «Promotion of Innovation», the new licence category is, in principle, open to everyone.
When is a «traditional» banking licence still required?
A «traditional» banking licence is required if an institution:
- accepts deposits commercially from the public with a value exceeding CHF 100 million; or
- invests the deposits or pays interest on the deposits received from the public.
How do companies that would like to apply for a «Fintech» licence need to be organised?
In essence, the following requirements apply for any company that would like to apply for a «Fintech» licence:
- It must be organised as a stock corporation («AG»), limited partnership («Kommandit-AG») or limited liability company («GmbH») and have minimum capital of 3% of the public deposits which it has received or at least CHF 300,000 (14a Banking Ordinance; Art. 17a Banking Ordinance)
- Its registered office and current administration must be located in Switzerland (14a Banking Ordinance);
- It is obliged to precisely describe its sphere of business, both factually and geographically, in its articles of association or in internal regulations (14b Banking Ordinance);
- It must have an appropriate administrative organisation ( 14c and d Banking Ordinance);
- Its executive bodies must guarantee the proper conduct of its business (1b para. 3 let. d Banking Act);
- It must have an appropriate risk management and compliance function (Art. 14e Banking Ordinance).
What are the main points of simplification for companies with a «Fintech» licence (as compared to banks)?
Following are the main points of simplification for companies with a «Fintech» licence (as compared to banks):
- Accounting is based exclusively on the Swiss Code of Obligations and not on the special rules of banking law (1b para. 4 let. a Banking Act);
- The Ordinance on Own Funds and Risk Diversification for Banks and Securities Dealers and the Ordinance on Liquidity of Banks do not apply (Art. 17a para. 3 Banking Ordinance).
Since when can the new "Fintech" licence be requested?
Art. 1b of the Banking Act and the corresponding amendments to the Banking Ordinance were enacted by the Federal Council on 1 January 2019. Companies have been able to apply for a «Fintech» licence as of this date.
Are there specific conduct rules for companies with a «Fintech» licence?
According to Art. 7a of the Banking Ordinance, companies with a «Fintech» licence have a specific duty to provide information. They must provide their clients with information about the following points in writing:
- the risks associated with their business model, services and technologies used;
- the fact that the deposits are not covered by the deposit guarantee.
Furthermore, companies with a «Fintech» licence are obliged to hold the deposits that they receive in a certain way. In particular, the deposits must be kept separately from own funds or entered in the books in such a way that they can be shown separately from own funds at any time (Art. 14 f Banking Ordinance).
Moreover, Art. 14g of the Banking Ordinance stipulates that persons with a «Fintech» licence must take appropriate precautions to avoid conflicts of interest or to prevent any disadvantage to clients as a result of such conflicts of interest. This obligation is consistent with Art. 25 FinSA, but was nevertheless laid down separately for companies with a «Fintech» licence because such companies may have a business model that does not involve the provision of financial services within the meaning of the FinSA (cf.: «Is the FinSA also applicable to companies with a «Fintech» licence?»).
Is the FinSA also applicable to companies with a «Fintech» licence?
The FinSA is applicable across sectors to any financial service provider (Art. 2 para. 1 let. a FinSA). However, whether a company with a «Fintech» licence provides financial services depends on its specific business model. Since the services offered by «Fintech» companies may be varied, the question of the applicability of the FinSA cannot be answered in general, but must instead be examined on a case-by-case basis.