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FROM THE BLOG

Swiss Regulation of FinTech – New FinTech rules will enter into force on 1 August 2017

Posted by on 11 July 2017

In February 2017, we reported on the opening of a consultation on new draft regulations designed to reduce barriers to entry for FinTech firms and to strengthen the attractiveness of the Swiss financial markets. The consultation process was closed on 8 May 2017. Following certain suggestions made, the Federal Council during its meeting of 5 July 2017 implemented the proposed changes to the law resulting in simplifications not only for FinTech firms but also for established financial service providers. Read more about the amendments which will enter into force on 1 August 2017.

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1. Extension of timeframe for holding settlement accounts:

Accounts held for clients purely for settlement purposes are not deemed to be bank deposits and hence are not subject to a banking licence provided that settlement takes place within a timeframe of 60 calendar days. This is a significant extension of the timeframe for settlements, which previously had to take place within 7 days. This timeframe does not apply to securities dealers for which there is no specific timeframe according to existing FINMA practice.

2. Creation of an innovation zone:

Under the Banking Act, anyone holding 20 or more deposits from the public or requesting deposits from the public is deemed to be a bank and hence required to obtain a banking licence. However, based on the new rules, no banking licence is required where

(i) the funds held do not exceed CHF 1 million,

(ii) the funds are neither interest bearing nor are they reinvested, and

(iii) the depositors were informed in advance (i.e. prior to contributing the deposit) and evidenced in the form of text, whether in writing or otherwise, that the deposit taking entity is not supervised by FINMA and that the funds are not covered by deposit protection. 

These requirements are generally speaking cumulative, which means that presently - if only one requirement is not met – a full-fledged banking licence is required. Furthermore it must be noted that the laws preventing money laundering and terrorism financing remain fully applicable to the innovation zone.

Companies mainly focussing on a commercial-industrial activity and using the deposits of the public to finance this activity, must fulfil the requirements (i) and (iii) above, but need not meet section (ii). This exception is targeted at allowing for reinvestments in crowd lending projects. In all other cases reinvestment remains strictly prohibited and the deposits must remain on the account.

If the threshold of CHF 1 million is exceeded, FINMA must be notified within 10 calendar days and an application for a banking licence in accordance with the requirements of the Federal Banking Act must be filed with FINMA within 30 calendar days. It remains unclear though whether such application would have to be filed even if the funds held are reduced below the threshold of CHF 1 million within the timeframe of 10 calendar days. In the event that an application must be filed FINMA may prohibit the company in question from accepting further deposits from the public until it has decided on the application. At present the requirements for a full-fledged banking licence would need to be met once the threshold of CHF 1 million has been exceeded. Once FinSA is in force such cases could first be covered by the «banking licence light» (see below) before a full banking licence would be required.

3. Future amendments already addressed by Parliament:

It is noteworthy that Swiss parliament has also already addressed further changes to the Federal Banking Act which will lead to a reduced regulatory burden for companies holding no more than CHF 100 million non-interest bearing funds from the public which may not be reinvested (so-called «banking licence light»). These changes will enter into force in the context of the new Financial Services Act (FinSA) and the Financial Institutions Act (FinIA). The amendments are expected to provide for significantly lighter requirements in particular relating to the applicable accounting rules and the financial audit requirements. The funds from the public shall not be covered by deposit protection as they would be in the case of an ordinary bank, which fact must be made known to the depositor prior to making the deposit. We expect that the Swiss parliament will adopt the FinSA/FinIA bill end of 2017 or beginning of 2018. The new laws will then enter into force no less than six months after having been adopted. 

Read our blogpost dated February 9, 2017 about Swiss Regulation of FinTech - Federal Council initiates consultation on new rules

 

Topics: Banking & Finance | Corporate & Commercial

  
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Dr. Catrina Luchsinger Gähwiler

Catrina is a specialist in financial market law and corporate law. She has a wealth of experience advising financial market clients, including banks, asset managers and investment vehicles, as well as substantial operational knowledge. She also serves on the management boards of various com-panies, some of which are in the financial services sector. Catrina joined our firm as an associate in the year 2000. She became a partner in 2007. Catrina advises financial services clients and investment companies on regulatory issues as well as on contractual aspects relating to the financial market industry. She furthermore has considerable experience in acquisition and financing transactions, in general corporate work, both for listed and privately held companies, in mergers and acquisitions – predominantly in the financial services sector – and regularly advises in equity capital market transactions both for SIX Swiss Exchange, where she is admitted as a listing agent, and for BX Berne eXchange. Chambers Europe and Chambers Global have identified her as a Recognised Practitioner in the field of banking and finance, where clients have commended her client orientation. She is also ranked as a leading lawyer in the IFLR1000 guide for financial services regulatory and M&A. Catrina obtained her law degree from the University of Zurich in 1991 and was admitted to the Zur-ich Bar in 1995. She gained her PhD in 2004. Her working languages are German, English and French. She is a member of the Zurich Bar Association, the Swiss Bar Association, the International Bar Association (IBA) and the International Pacific Bar Association.

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Benjamin Dürig

Benjamin is an experienced transaction lawyer with a focus on M&A and corporate finance transactions, and corporate law. Benjamin advises clients in M&A and corporate finance transactions and is an experienced team leader in complex transactions. He advises listed and non-listed entities, including regulated financial institutions. He has in-depth expertise on the legal issues relating to real estate in and outside of transactions, including regulatory aspects, environmental issues (polluted sites), and complex commercial lease agreements. Benjamin is a regular speaker to various audiences on topics relating to his practice, including international lawyers' conferences, commercial chambers and industry organisations. He joined our firm as an associate in 2009 and became counsel in 2017. Before that, he worked at a Zurich district court and a French-speaking law firm for a number of years. Benjamin’s law degree is from the University of Zurich (2003) and he was admitted to the Zurich Bar in 2007. He is a member of the Swiss Bar Association, the Zurich Bar Association, the Franco-Swiss Chamber for Trade and Industry, and the Executive Committee of the International Association of Young Lawyers (AIJA). His working languages are German, French and English.

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Dunja Koch

Dunja Koch has expertise in all aspects of corporate and finance law, advising mainly UK and US clients with regard to Switzerland. She is the managing partner of the London office. She joined the firm in 1998 and became a partner in 2003. She regularly works on corporate and M&A deals, as well as leveraged and acquisition finance transactions, but also project, commodity and asset finance matters, including aircraft finance. Here, she acts on behalf of aircraft manufacturers, banks and leasing companies in relation to the Swiss aspects of acquisition of aircraft and engines. Her practice further covers regulatory matters, where she advises asset managers, funds, securities dealers and other financial institutions in relation to their cross-border activities in Switzerland. The Legal 500 United Kingdom 2017 recommended her as a top foreign lawyer in London. Chambers Global (2018) ranked her as leader in the fields of Banking & Finance (Switzerland) and Banking & Finance (UK). She was also specifically recommended in the 2018 edition of the Legal 500 EMEA for Transport Law matters and named one of IFLR1000’s Women Leaders- an elite cohort of the 300 leading female transactional experts in local markets globally. She is the only practitioner from Switzerland to be featured in the guide. Dunja Koch holds a law degree from the University of Zurich and a LL.M. from Queen Mary, University of London. She qualified in Geneva in 1997 and in England and Wales in 1999. She speaks German, French, English and Italian. She is registered on the roll of attorneys in Zurich and a member of the International Bar Association (IBA), Association Suisse de Droit Aérien et Spatial and the Aviation Club of the UK.

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Dr. Mark Montanari

Mark’s practice focuses on capital and financial markets, corporate law, start-ups as well as M&A and financing transactions. He regularly advises international and domestic clients in these fields, including public takeover and stock exchange laws and regulations. Mark joined our firm in 2010 and became counsel in 2017. Prior to that, he worked as a clerk at the District Court Emmental-Oberaargau and with a business law firm in Berne. Thereafter he worked as research and teaching assistant at the University of Berne (Institute of Business Law). After having graduated in law from the University of Berne in 2005, he was admitted to the Bar in 2008 and went on to complete a PhD (summa cum laude) in 2011 in the field of financial markets. His working languages are German and English. Mark is a member of the Zurich Bar Association, the Swiss Bar Association and the International Association of Young Lawyers (AIJA).

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Laetitia Meier Droz

Laetitia is a partner in the Banking and Finance group in our Geneva office and specialised in all aspects of commercial, corporate and banking law. Her practice focuses on investment products and services with an emphasis on collective investment schemes, capital markets and regulatory matters. Laetitia is also active in banking litigation and white-collar matters, advising individual and corporate clients on various criminal law matters, including mutual legal assistance. She is a Deputy Judge with the Geneva Criminal Court. Her two-year tenure as Head of Legal of an international leading investment company, specialised in emerging, sustainable and inclusive finance, provided her with in-depth knowledge of the legal and business needs of an asset manager and distribution agent active worldwide, as well as a significant expertise in social impact finance. Her working languages are French, English and Spanish. Laetitia is member of the Geneva Bar Association, the Swiss Bar Association (SAV/FSA), as well as the Legal Team of Sustainable Finance Geneva. She is a member of the Geneva Bar Exam Commission.

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