synopsis of the most important regulatory developments · synopsis of the most important regulatory...

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Synopsis of the most important regulatory developments Status as at 1 March 2018

Banking and Asset Management – what counts

PwC Synopsis of the most important regulatory developments (as at 1 March 2018) 2

Synopsis of the most important developments (status as at 1 March 2018)

Interdisciplinary projects

Development

Consideration by Parliament

In force, end of final transi-tion period

Hearing/consultation

Publication of final regulation

Full application

Publication results of hearing/consultation/dispatch

Referendum deadline ≈ Estimated/approximately

page

2017

2018

2019

2019

2020

2021

2022

2023

2024

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Auditing FINMA circ. 13/3 'Auditing' 5 30 31

.

≈

Anti-money laundering/compliance Federal Act to Increase the Effectiveness of Combating Money Laundering and Terrorist Financing

5

≈ ≈

Anti-Money Laundering Ordinance (AMLO-FINMA)

5

4.

16. ≈

Mise en œuvre des recommandations du Forum mondial relatives à la transparence des personnes morales et à l’échange de renseignements émises

6

17.

24.

FINMA circ. 16/7 ‘Video and online identification’

6

13.

28.

Organisation of financial market

Financial Services Act (FinSA) 6 ≈ ≈

Financial Services Ordinance (FinSO) 6 ≈ ≈ ≈

Financial Institutions Act (FinIA) 7 ≈ ≈

Financial Institutions Ordinance (FinIO) 7 ≈ ≈ ≈

Financial Market Infrastructure Ordinance (FinMIO) (revised risk mitigation duties)

7

FINMA Financial Market Infrastructure Ordinance (FMIO-FINMA) (introduction of a clearing obligation)

7

18.

12. ≈

FINMA circular 08/4 ‘Record of securities transactions’

7 1.

FINMA circular 08/11 ‘Reporting duty for securities transactions’

8

31.

FINMA circ. 18/2 ‘Disclosure require-ments for securities transactions’ (total revision)

8 1.

FINMA circ. 18/1 ‘Organised trading facility’ 8 1.

FINMA guidance 02/2017 (FMIA: reporting requirements/trade repositories)

8 1.

31.

1.

Other topics

Amendment to the Code of Obligations (Law on companies limited by shares)

9

Amendment of the Gender Equality Act (EqA)(introduction of regular pay analyses)

9

28. ≈

EU General Data Protection Regulation (EU-GDPR)

9

25.

Federal Act on Data Protection (FADP) (total revision)

10

15.


Banks/securities dealers

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Accounting FINMA circ. 15/1 ‘Accounting – banks’ (ARB) (Expected loss adjustment)

10 ≈ ≈ ≈ ≈ ≈

Disclosure FINMA circ. 08/22 ‘Disclosure’ 10 31

.

FINMA circ. 16/1 ‘Disclosure’ (phase I) 11 30

1.

FINMA circ. 16/1 ‘Disclosure’ (revision due to new corporate governance requirements)

11

31.

FINMA circ. 16/1 'Disclosure' (clarification on transitional periods)

1121

.

31.

FINMA circ. 16/1 ‘Disclosure’ (phase II) 12 31

31

≈ ≈

FINMA circ. 16/1 ‘Disclosure’ (phase III) 12 ≈

Capital adequacy/risk diversification

Ordinance on Capital Adequacy and Risk Diversification (CAO) (revision dated 1 June 2012)

12

31.

1.

Ordinance on Capital Adequacy and Risk Diversification (CAO) ('too big to fail)

13

31.1

2.

1.1.

CAO / FINMA circ. 17/7 ‘Credit risks’ 13 31.

1.1.

FINMA circ. 17/7 ‘Credit risks’ (credit risk management requirements)

14

31.

31. ≈ ≈

FINMA circ. 17/7 ‘Credit risks' (replicate extensions to SA-CCR and MCA transition periods)

14

22.

15.

CAO / FINMA circ. 19/1 ‘Risk diversification’ 14 22

1.

FINMA circ. 08/23 'Risk diversification' 14 31.

CAO (setting minimum requirements for leverage ratio)

14

22. 1.

FINMA circ. 15/3 ‘Leverage ratio’ (optional use of SA-CRR)

15

22.

15.

CAO / FINMA circ. 08/20 ‘Market risks’ (fundamental review of the trading book)

15 ≈ ≈ ≈ ≈

FINMA circular 11/2 'Capital buffer and capital planning – banks'

15

31.

31. ≈ ≈

FINMA circ. 13/1 ‘Eligible equity capital b k

15 31. 31. ≈ ≈

CAO (gone concern requirements) 16 23

30

≈

Basel III framework revision (post-crisis reforms)

16 7.

1.1.

Liquidity Liquidity Ordinance (LiqO) / FINMA circ. 15/2 'Liquidity risks' (quantitative requirements)

17

31.

1.

Liquidity Ordinance (LiqO)(relaxation of LCR)

17

22. 1.

Liquidity Ordinance (LiqO)/FINMA circ. 15/2 ‘Liquidity risks’ (partial revision of

)

17

22.


Fund management companies/investment funds/repre-sentatives of foreign collective investment schemes

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Apr

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Nov

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May

Jun

Jul

Aug

Organisation/risk management

FINMA circ. 17/1 ‘Corporate governance’ 17 30

1.

FINMA circ. 10/1 ‘Remuneration schemes’ 17

FINMA circ. 08/21 ‘Operational risks’ 18

FINMA circ. 08/6 ‘Interest rate risks’ 18 ≈

FINMA circ. 18/x ‘Interest rate risks’ 18 31. 31. ≈ ≈

FINMA circ. 08/7 ‘Outsourcing' 18 5. 1. 1.4

FINMA Banking Insolvency Ordinance (partial revision)

19

30.

1.

Financial groups and conglomerates under the BankA

19 ≈

Fintech

BankA (reducing the market entry barriers for Fintech companies)

19 ≈ ≈

BankO (implementation of less stringent licencing requirements for Fintech companies)

19

≈ ≈ ≈

BankO (reducing the market entry barriers for Fintech companies)

19

FINMA circ. 08/3 ‘Public deposits with non-banks’ (amendments due to Fintech provisions)

20

1.

16.

14.

1.

Other topics

Strengthening depositor protection 20 ≈ ≈

FINMA circ. 08/1 'Authorisation and reporting obligations'

20

8.

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SFAMA guidelines for money market funds 21

28.


Most important aspects and changes

Interdisciplinary projects Regulation Most important aspects/changes Status

Auditing

FINMA circular 13/3 'Auditing'

• Greater reliance on the work performed by Internal Audit.

• Relaxation of the audit cycles within the basic audit: – Audit areas with 'medium' net risk: audit every 6

years instead of a 3-year cycle; – Focus of regulatory audit for banks with no is-

sues every 3 years (category 5) and every 2 years (category 4).

• Increased FINMA interventions (on-site audits/su-pervisory reviews) by means of case-related inter-ventions by FINMA itself or its appointed agent.

• Audit procedures controlled using the cost estimate to be submitted to FINMA along with the audit strategy.

Hearing until 31 January 2018 Expected entry into force: 1 January 2019

Anti-money laundering/compliance

Federal Act to Increase the Effectiveness of Combating Money Laundering and Ter-rorist Financing

• Implementation of recommendations from the 2016 FATF mutual evaluation report of Switzerland.

• Improving conformity with FATF standards.

Hearing expected from June to September 2018

Anti-Money Launder-ing Ordinance (AMLO-FINMA)

• Verification of the information about the beneficial owner using a risk-based approach even for ‘normal’ risk clients.

• Duty to update regularly customer information for all business relationships.

• Extension and specification of the criteria that indi-cate business relationships involving higher risks.

• Specification of the requirements relating to group-wide compliance with the fundamental principles of money-laundering prevention and the overall moni-toring of legal and reputation risks by financial in-termediaries engaged in activities abroad.

• Threshold for cash transactions with occasional cus-tomers and the subscription of unlisted collective in-vestment schemes lowered from CHF 25,000 to CHF 15,000.

• Duty to check the information about the client and the beneficiary involved in a payment transaction.

Hearing until 16 October 2017 Expected entry into force: 2019


Regulation Most important aspects/changes Status

Federal Act to Imple-ment the Recommen-dations of the Global Forum on the Trans-parency of Legal Enti-ties and the Exchange of Information for Tax Purposes

• Conversion of bearer shares into registered shares for non-listed companies and companies that do not issue shares as book-entry securities.

• Introduction of a system of sanctions for breaches of the following duties: – Reporting by the shareholders of the beneficial

owners; – Keeping registers of shareholders and beneficial

owners. • Right of inspection of authorities and financial inter-

mediaries. • Amendments to various laws, incl. Code of Obliga-

tions, Criminal Code and Collective Investment Schemes Act.

Hearing until 24 April 2018

FINMA circular 16/7 ‘Video and online iden-tification’

• Amendment of the circular to take into considera-tion rapid technological change.

• Video identification: – Verification using a one-time transaction num-

ber (TAN) is no longer required;

– At least three randomly selected optical security features contained in the identification docu-mentation should now be verified;

• Online identification: – Customer due diligence no longer requires pay-

ment transfer from a Switzerland-based bank. Under specific rules, a payment transfer from a bank based in a Financial Action Task Force (FATF) member country will now suffice.

• Using liveness detection to check photos.

Hearing until 28 March 2018 Transition period: 6 months after publication

Organisation of financial market

Financial Services Act (FinSA)

• Adjustment of behaviour and product rules to the customer segment (private customers/professional customers): – Information on financial services provider, ser-

vices and product, incl. by means of a basic in-formation sheet;

– Suitability check before transactions with finan-cial instruments (except ‘execution-only’);

– Suitability check if providing advice and asset management.

• Obligation for client advisors (relationship manag-ers) to be entered in a public register and to under-take initial and further training.

• Extension of legal means in favour of customers, incl. right to demand publication of documents.

Considered by the Council of States on 14 December 2016 and by the National Coun-cil on 13 September 2017; next considera-tion by the Council of States on 7 March 2018 Expected entry into force: 2019

Financial Services Or-dinance (FinSO)

• Specification of the implementation provisions re-lating to the Financial Services Act.

• Regulations relating to the offering of financial ser-vices.




Financial Institutions Act (FinIA)

• Supervision of all financial service providers who operate an asset management business in any form whatsoever is to be governed in a uniform piece of legislation.

• Managers of individual client assets as well as those who manage the assets of Swiss occupational bene-fits schemes will require a license in the future.

Considered by the Council of States on 14 December 2016 and by the National Coun-cil on 13 September 2017; next considera-tion by the Council of States on 7 March 2018 Expected entry into force: 2019

Financial Institutions Ordinance (FinIO)

• Specification of the implementation provisions re-lating to the Financial Institutions Act.

• Regulations relating to authorisation and organisa-tional requirements for regulated financial institu-tions.


Financial Market In-frastructure Ordinance (FMIO) (revised risk mitigation du-ties)

• Alignment of the obligations set out in the FMIA re-lating to the exchange of collateral for OTC deriva-tive transactions not cleared by a central counter-party.

• Extension of the exceptions to the collateral duties.

In force since 1 August 2017

FINMA Financial Mar-ket Infrastructure Or-dinance (FMIO-FINMA) (introduction of a clearing obligation)

• New clearing obligation will apply to standardised interest rate and credit derivatives traded over the counter (OTC).

• Obligation applies to financial and non-financial counterparties whose positions in OTC derivatives transactions exceed the clearing thresholds set forth under art. 88 FMIO (credit/equity derivatives: CHF 1.1 billion; interest rate/currency/commodity and other derivatives: CHF 3.3 billion).

• The FMIO-FINMA will enter into force only after FINMA has authorised or recognised the key CCPs for Swiss market participants.

• After the entry into force of Annex 1 of the FMIO-FINMA, transitional periods ranging from 6 to 18 months will apply to the market participants af-fected (depending on their classification) before compliance with the clearing obligation becomes mandatory.

Consultation until: 12 February 2018 Publication of final regulation expected in Q3 2018

FINMA circular 08/4 ‘Securities journals’

• Formal amendments to the new legal provisions. • Extension of the duty to maintain a securities jour-

nal to orders and transactions involving derivatives. • Obligation to maintain a journal for derivatives that

must be disclosed according to FINMA circ. 18/2 ‘Disclosure requirements for securities transactions’.

• Documentation of the beneficial owner.

In force since: 1 January 2018



FINMA circular 18/2 ‘Disclosure require-ments for securities transactions’ (total revision of previous FINMA circ. 08/11 ‘Disclo-sure requirements for secu-rities transactions’)

• Disclosure required of derivatives with more than one underlying security if the proportion of those se-curities authorised for trading on a Swiss venue/platform amounts to at least 25%.

• Definition of the term ‘beneficial owner’. • Definition of reference for the identification of the

beneficial owner in relation to a transaction by means of nationality, date of birth and the internal bank code, or Legal Entity Identifier (LIE).

• Aggregated orders must now be reported both when they are executed on the stock exchange and upon definitive allocation to clients.

In force since: 1 January 2018 Revocation of previous FINMA circ. 08/11: 31 December 2017

FINMA circular 18/1 ‘Organised trading facilities’

• Specification of the requirements of art. 38–42 FMIO for the operation of an organised trading fa-cility.

• Definition of the terms ‘organised trading facility’, ‘discretionary/non-discretionary trade’, ‘multilat-eral/bilateral trade’ and ‘traded financial instru-ment’.

• Description of the duties of an operator of an organ-ised trading facility.


FINMA guidance 02/2017 and 05/2017 (FMIA: reporting require-ments/trade repositories)

• The authorisation of a Swiss trade repository (SIX Trade Repository AG) and the recognition of a for-eign trade repository (Regis-TR S.A.) trigger the re-quirement for Swiss market participants to report derivatives transactions.

• Open derivatives transactions must be reported from the following dates at the latest: − From 1 October 2017, if the counterparty which

is required to report is a central counterparty (CCP) or a financial counterparty (FC) which is not small;

− From 1 January 2018, if the counterparty which is required to report is a small financial counter-party (FC-)2 or a non-financial counterparty (NFC) which is not small;

− From 1 January 2019, in all other cases; how-ever, transactions between two small non-finan-cial counterparties (NFC-) do not have to be re-ported.

Reports have to be made (depending on the type and size of the persons subject to the reporting requirement) by 1 January 2019, at the latest



Other topics

Amendment of the Code of Obligations (Law on companies limited by shares)

• Transfer of the provisions of the Ordinance against excessive remuneration in listed companies limited by shares (ERCO) to federal law.

• Establishes guidelines for signing-on bonuses and compensation for prohibition of competition.

• Liberalisation of the incorporation and capital provi-sions.

• Better alignment of Company Law to the new Ac-counting Law, e.g. regarding a company’s own shares and the use of foreign currencies in account-ing and financial reporting.

• Gender quotas for the Board of Directors (min. 30% each) and Executive Board (min. 20%) of large listed companies, ‘comply or explain’ clause.

• Proposed solutions with regard to shares held that are not recorded in the stock register (so-called ‘dispo shares’).

• Increased transparency requirements applicable to the commodities sector through the disclosure of payments to state-owned entities.

Federal Dispatch to Parliament published on 23 November 2016 Consideration by Par-liament pending

Amendment of the Gender Equality Act (EqA) (introduction of regular pay analyses)

• Employers with at least 50 employees must perform a pay analysis every 4 years.

• Pay analyses performed using standard analysis model provided by the Federal Government or using a scientific and legally compliant method.

• Review of internal pay analysis by an independent body: − Authorised audit firm; − Recognised equal pay experts; or − Organisations for the representation of employ-

ees or the promotion of gender equality. • Duty to provide information to shareholders of

listed companies and to employees.

Federal Dispatch pub-lished 5 July 2017 Council of States re-ferred the bill for re-view to the advisory committee; expected to be considered again by Council of States in June 2018

EU General Data Pro-tection Regulation (EU-GDPR)

• Significant tightening of the rules regarding the use, collection, storage and sharing of data.

• Applicable to companies based in Switzerland if they process that personal data of EU citizens and if goods or services are offered in the EU.

• Serious breaches of the law punished by fines of up to either 4% of group annual turnover or EUR 20 million.

In force since: 24 May 2016 Transition period until 25 May 2018



Federal Act on Data Protection (FADP) (total revision)

• Extended duties to provide information and keep records.

• Strengthening of the supervisory body and tighter sanctions.

• Takes into consideration the EU's General Data Pro-tection Regulation (EU-GDPR), which applies as of 25 May 2018, and the Council of Europe's Conven-tion for the Protection of Individuals with regard to Automatic Processing of Personal Data (ETS 108).

• Companies that have cross-border business in the EU must observe the provisions of EU-GDPR.

Federal Dispatch pub-lished 15 September 2017 Consideration by Par-liament pending

Banks/securities dealers Regulation Most important aspects/changes Status

Accounting

FINMA circular 15/1 ‘Accounting – banks’ (ARB) (expected loss adjustment)

• Parts of the FINMA circular incorporated in a new FINMA ordinance on accounting.

• Introduction of an expected loss approach to deter-mine value adjustments. − Category 1 and 2 banks and IRB banks: model-

based calculation of expected losses; − Category 3 banks: simple approach to calculate

expected losses not based on models; − Other banks: simplified approach for the crea-

tion of allowances for latent risks of default based on the rules currently in force.

• Existing FAQs integrated in the circular with only formal amendments with no material impact ex-pected.

Hearing expected: mid-2018 Transitional deadline for implementation of expected loss ap-proach: 1 January 2020

Disclosure FINMA circular 08/22 ‘Disclosure – banks’ (FINMA circular dated 20 November 2008, with amendments of 29 Octo-ber 2014)

• Acceptance of requirements concerning qualitative and quantitative disclosure of: − Leverage ratio; − Liquidity coverage ratio (LCR).

• From 2015: disclosure of capital adequacy according to the previously applied periodicity: − For banks with annual disclosure: until end of

April 2016 at the latest (based on year-end 2015 figures);

− For banks with semi-annual disclosure: until end of August 2015 (based on figures as of end of June 2015).

In force since: 1 January 2015 Progressively replaced by FINMA circ. 16/1



FINMA circular 16/1 ‘Disclosure – banks’ (phase I – FINMA circ. dated 28 October 2015)

• Total revision and replacement of former FINMA cir-cular 08/22 Disclosure – banks, with focus on stand-ardising certain tables in order to improve compara-bility.

• Exemption from detailed disclosure requirements according to the Basel standards for smaller institu-tions (FINMA supervisory categories 4 and 5).

• Significant, one-off conversion costs expected for about 30 institutions of supervisory categories 1 to 3.

• First annual disclosure for banks in: − Regulatory category 1, by end of April 2017 latest

for the financial year ending 31 December 2016; − Regulatory categories 2 & 3, by end of April 2018

latest; − Regulatory categories 4 & 5, by end of April 2019

latest. • Banks that apply the ‘consolidation discount’ and

foreign-owned banks exempted from the detailed disclosure obligations: publication of at least 6 key figures in the management report, for the first time as of 31 December 2015.

In force since: 1 January 2016 Transition period until 2019

FINMA circular 16/1 ‘Disclosure – banks’ (revision due to new corporate governance requirements)

• Regulatory requirements concerning disclosure bun-dled in FINMA circular 16/1.

• Disclosure requirements for corporate governance specified. − Organisation, committees, composition, experi-

ence and independence of the BoD; − Composition, professional experience and train-

ing of BoD members; − Duty to disclose certain aspects according to SIX

Directive on Information relating to Corporate Governance for category 1 to 3 banks.

• Duty to update information on internet site within 3 months.

In force since: 1 January 2017 First-time implemen-tation of disclosure re-quirements as of the 2017 annual report

FINMA circular 16/1 ‘Disclosure – banks’ (specification of transition periods)

• Amendment of mn 59 and 60 in the transitional pro-visions of the circular.

• Clarification that the first-time disclosures in accord-ance with Appendix 7 (corporate governance) shall be in 2017 annual reports − For category 4 and 5 banks; and − For banks that continue to apply SA-CH.

In force since: 21 September 2017



FINMA circular 16/1 ‘Disclosure – banks’ (phase II)

• Partial revision of the circular aiming to enhance comparability by standardising requirements for the content of disclosures. The key amendments are: − Summary table of key regulatory indicators (key

metrics); − Tables of revised standards on interest rate and

market risks; − Tables for global systemically important banks

with regard to TLAC requirements; − Tables on remuneration and prudential value ad-

justments; − No requirement to explain why reasons if infor-

mation is not published because it is not mate-rial.

• Expected to be applicable to disclosures as of 31 De-cember 2018; earlier adoption is permitted.

Hearing until: 31 January 2018 Expected enactment of the regulations in April 2018 Expected entry into force: 31 December 2018

FINMA circular 16/1 ‘Disclosure – banks’ (phase III)

• Extension of the duties of disclosure. In preparation

Capital adequacy/risk diversification Ordinance on Capital Adequacy and Risk Di-versification (CAO) (total revision of 1 June 2012)

• Comprehensive revision of capital adequacy, risk di-versification and liquidity rules due to changes to the Basel III rules.

• More stringent requirements concerning quality and amount of equity.

• ‘Swiss finish’ discontinued (Swiss standard ap-proaches to credit risk measurement and risk diver-sification), with a transitional period running until 31 December 2018 at the latest.

In force since: 1 January 2013 Extensive transitional period from 2013 until 2018



Ordinance on Capital Adequacy and Risk Di-versification (CAO) (amendment of ‘too big to fail’ provisions)

• Newly calibrated overall requirements for going-con-cern capital of systemically important banks: − Basic requirement: 4.5% leverage ratio + 12.86%

of risk-weighted assets; − Progressive component depending on market

share; − Progressive component depending on total com-

mitment.

• Extension of counter-cyclical buffer for large banks with significant accounts receivable in the foreign private non-banking sector: − Capital buffers calculated as the weighted aver-

age of the buffers in effect in the member states of the Basel Committee to which banks have sig-nificant credit exposure;

− The extended counter-cyclical capital buffer is limited to 2.5% of the weighted exposure.

• Transfer from FINMA circ. 11/2 ‘Capital buffer and capital planning – banks’ of: − Capital ratios and capital buffer in the Capital

Adequacy Ordinance (CAO); and − Categorisation of banks in the Banking Ordi-

nance (BankO).

In force since: 1 July 2016 Various transitional periods until 2019 latest

Ordinance on Capital Adequacy and Risk Di-versification for Banks and Securities Traders (CAO)

FINMA circular 17/7 ‘Credit risks – banks’ (total revision of FINMA circular 08/19)

• Adaptation of calculation of credit equivalents for derivatives: – Introduction of a standard approach to calculate

the credit equivalent amount of derivatives (SA-CCR);

– Simplified SA-CCR for institutions of supervisory categories 4 and 5;

– Simplified SA-CCR for category 3 institutions un-der certain conditions.

• Adaptation of methodology and risk weight rates for the coverage of unit shares in collective investment schemes: – Introduction of various approaches to calculate

the capital adequacy requirements: Look-through approach LTA, mandate-based approach MBA or fall-back approach FBA;

– Institutions in supervisory categories 4 and 5 are allowed to apply the fallback approach FBA with a risk weight of 250% instead of 1,250%, if the fund has a synthetic risk indicator of 1 to 4;

– Fallback approach permitted for category 3 insti-tutions under certain conditions.

• Revision of regulatory capital for securitisation posi-tions on the banking book.

Revisions to the Ordi-nance published on 23 November 2016 Revisions to FINMA circular published on 19 December 2016 In force since: 1 January 2017 with transition period until 1 January 2020 (Extended with the publication of the re-vised CAO dated 22 November 2017)

http://en.pons.com/translate/english-german/Capital

http://en.pons.com/translate/english-german/ffers



FINMA circular 17/7 ‘Credit risks – banks’ (eligibility of life insurance policies/shares in MCA)

• Definition of the eligibility of spouses' life insurance policies.

• Extension of simplified risk-weighting approach of unit shares in managed collective assets (MCA) for instruments with a risk indicator >4.

Hearing until: 31 January 2018 Expected enactment of regulations: April 2018 Expected entry into force: January 2019

FINMA circular 17/7 ‘Credit risks – banks’ (replicate extensions to SA-CCR and MCA transi-tion periods)

• Replicate in the circular the transition periods from the revision of the Capital Adequacy Ordinance dated 22 November 2017: – Extension of transition period for applying SA-

CCR instead of the current exposure method from January 2018 to January 2020;

– Extension of transition period for applying the new capital adequacy rules for shares in managed collective assets (MCA) held in the banking book from 1 January 2018 to 1 January 2020.

Hearing until: 15 February 2018

Ordinance on Capital Adequacy and Risk Di-versification for Banks and Securities Traders (CAO)

FINMA circular 19/1 ‘Risk diversification – banks’ (amendments to risk diversification rules)

• Use of freely available capital to cover exposures higher than the 25% limit is discontinued, except with regard to the processing of client payments for a maximum period of five bank working days and cor-porate affiliations.

• Exceptions to the 25% upper threshold limited mainly to positions with central banks and central governments and central counterparties.

• Receivables due from mortgage bond institutions weighted at 10%.

• Modification of reporting method. • Obligation to report by end of May 2018 large expo-

sures likely to exceed the 25% upper threshold when the new rules enter into force.

• Extension of transition period for the introduction of SA-CCR and the weighting of shares in managed col-lective assets from 12 to 36 months.

• New circular replaces FINMA circ. 08/23 ‘Risk di-versification – banks’.

• Rules relaxed for category 4 and 5 banks.

Entry into force: 1 January 2019

Ordinance on Capital Adequacy and Risk Di-versification (CAO) (setting minimum require-ments for leverage ratio)

• Minimum requirements relating to the leverage ratio set at 3% of core capital divided by unweighted total exposure.




FINMA circular 15/3 ‘Leverage ratio’ (optional use of SA-CRR)

• Introduction of optional use of SA-CRR (standard-ised approach for measuring counterparty credit risk) in accordance with art. 57 CAO instead of the current exposure method to include derivative posi-tions in the calculation of the leverage ratio.

• If SA-CCR is used as an option: – Category 1 to 3 banks: obligation to report to

FINMA information about the impact; – Category 3 and 4 banks: no reporting obligation;

– Disclosure of the methodology when SA-CCR used as an option.

Hearing until: 15 February 2018

Ordinance on Capital Adequacy and Risk Di-versification for Banks and Securities Traders (CAO) FINMA circular 08/20 ‘Market risks – banks’ (fundamental review of the trading book modifica-tions)

• Implementation of the results of the fundamental re-view of the trading book (FRTB) for the market risk conditions of the Basel Committee on Banking Su-pervision (BCBS).

• Implementation requires further revision of the Cap-ital Adequacy Ordinance (CAO) and FINMA circular ‘Market risks – banks’.

• Due to the delay in implementation in other jurisdic-tions, especially the European Union, the law will en-ter into force in Switzerland as of 31 December 2020 at the earliest.

• Further delay expected until 2022 due to the post-ponement of implementation by the Basel Commit-tee.

Expected hearing: Q1 2019 Expected enactment of the regulations in December 2019 Expected entry into force: January 2022

FINMA circular 11/2 'Capital buffer and capital planning – banks'

• Removed provisions on bank categories and capital buffers as included in new provisions of the CAO.

• Definition of the calculation of the target capital amount (=total capital ratio + countercyclical buffer + institution-specific capital buffer).

• Established percentage equity capital shortfall re-quiring measures to be taken.

Hearing until: 31 January 2018 Expected enactment of the regulations in April 2018 Expected entry into force: 1 January 2019

FINMA circular 13/1 ‘Eligible equity capital – banks (partial revision)

• Implementation of rules valid from 2019 relating to the treatment for capital adequacy purposes of TLAC instruments

• Specification of valid practice for the recognition of value adjustments for latent default risks:

− Recognised in Tier 2 capital; or − Deducted from related balance-sheet or off-bal-

ance-sheet item. • Revision of the regulatory filter due to the change in

IFRS.

Hearing until: 31 January 2018 Expected enactment of regulations: April 2018 Expected entry into force: 1 January 2019



Capital Adequacy Ordi-nance (CAO) (gone concern capital, de-duction of financial inter-ests in subsidiaries and other amendments)

• Introduction of gone concern capital requirements for domestic systemically important banks (D-SIBs).

• Stakes in group companies active in financial ser-vices: deduction of financial interests from capital (in an individual company perspective) replaced by a fi-nancial interest risk-weighting for group companies based in: − Switzerland: 250% − Abroad: 400%

• Group companies that provide the services necessary for the continuation of a bank's business processes will now be subject to consolidated supervision by FINMA.

Consultation expected until 30 May 2018 Expected entry into force: 1 January 2019

Basel III framework revision (post-crisis reforms)

• Revisions to the standardised approach for weighting credit risks: − Greater differentiation of risk weights rather

than using flat rates, especially for exposures se-cured by residential or commercial property de-pending on the loan.to-value ratio;

− Further assessment requirements for the applica-tion of external ratings.

• Use of the advanced IRB approach not allowed for certain exposure classes, especially exposures to cor-porates and to financial institutions.

• Revisions to the calculation methodology of credit valuation adjustments (CVAs).

• Replacement of previous approach to minimum cap-ital requirements for operational risk (basic indica-tor, standardised and advanced measurement ap-proaches) by standardised approach based on earn-ings and historical losses.

• Revision of the calculation methodology of the lever-age ratio and introduction of a leverage ratio buffer for global systemically important banks (G-SIBs).

• Output floor set for the internal model-based ap-proaches at minimum of 72.5% of risk-weighted as-sets calculated using the standardised approaches.

• Entry into force of the requirements for calculating minimum capital requirements for market risks (FRTB) postponed from 2019 to 1 January 2022.

Implementation of most of the Basel Com-mittee’s reforms by 1 January 2022 Phased increase of out-put floors for internal model-based ap-proaches from 2022 to 2027



Liquidity

Liquidity Ordinance (LiqO) (adaptation of quantitative requirements)

FINMA circular 15/2 ‘Liquidity risks –banks’ (qualitative requirements for liquidity risk manage-ment and quantitative re-quirements for liquidity maintenance of 3 July 2014)

• Replacement of present regulation total liquidity with compliance with Liquidity Coverage Ratio (LCR) as of 1 January 2015 with in principle monthly duty to report within 20 working days: – From 1 January 2015, non-systemically im-

portant banks’ compliance set at 60 %, with gradual increase in the percentage up to full compliance as of 1 January 2016.

• Introduction of Net Stable Funding Ratio (NSFR) as well as further observation ratios:

− Test reporting in 2015; − Mandatory reporting as of Q2 2016 to end 2017.

In force since: 1 January 2015 Various transitional periods up to 1 January 2019 at the latest

Liquidity Ordinance (LiqO) FINMA circular 15/2 ‘Liquidity – banks’ (relaxation of LCR)

• FINMA given the authority to implement relaxa-tions for category 4 and 5 banks with regard to evi-dence that the LCR has been maintained.

• Discontinuation of additional audit of the recogni-tion as HQLA of securities held abroad and denomi-nated in foreign currencies recognised by the SNB as acceptable for repo transactions.

• Principle of proportionality not extended in general to category 3 banks.

• Simpler method to evidence liquidity for category 4 and 5 banks.


Liquidity Ordinance (LiqO)/FINMA circular 15/2 ‘Liquidity risks –banks’ (partial revision of NSFR)

• Enactment of mandatory requirements relating to the Net Stable Funding Ratio (NSFR).

• Postponement of decision on introduction of NSFR in Switzerland until end of 2018 due to significant international delays.

Hearing until: 10 April 2017 Reassessment of fur-ther action: end 2018

Organisation/risk management

FINMA circular 17/1 ‘Corporate governance – banks’ (total revision of FINMA circular 08/24 ‘Supervision and internal control – banks’)

• Obligation to comply in full with the revised circular as of 1 July 2017.

• Transition period until 30 June 2018 for: − One third rule on the independence of the Board

of Directors; − The drafting and approval of a framework for in-

stitution-wide risk management; − The establishment of an audit committee and a

separate risk committee for institutions in su-pervisory categories 1 to 3, with possibility to combine the committees for category 3 institu-tions;

− The maintenance of a separate CRO position, also as part of the executive board, for systemi-cally important institutions.

In force since: 1 July 2017 Individual transitional periods end 30 June 2018

FINMA circular 10/1 ‘Remuneration schemes’

• Applicability is limited to banks required to main-tain equity capital in the amount of at least CHF 10 billion (previously CHF 2 billion).

• Clawback clause waiver.

In force since: 1 July 2017



FINMA circular 08/21 ‘Operational risks – banks’

• Category 4 and 5 banks are classed as ‘small banks’ with regard to the qualitative requirements. FINMA decides whether an institution is a ‘small’ or a ‘large’ bank and not the auditor as previously.

• Integration of principles and requirements for IT risk and cyber risk management concepts.

• Requirements concerning the maintenance of critical services in cases of insolvency (applies to systemi-cally important banks).

• Integration of the principles for risks relating to cross-border services.

In force since: 1 July 2017

FINMA circular 08/6 'Interest rate risks – banks'

• Repeal of the circular, which is replaced by the new FINMA circular 'Interest rate risks – banks'.

Expected repeal as of 31 December 2018

FINMA circular 18/x ‘Interest rate risks – banks’ (total revision)

• Measurement of interest rate risks using internal in-terest rate stress and shock scenarios as well as standard interest rate shock scenarios required by supervisory law.

• Scenarios for small banks in categories 4 and 5 may be relaxed under certain conditions.

• Specifications concerning the duties of the govern-ing body, internal reporting, risk appetite, data in-tegrity and validation as well as internal risk capac-ity.

• Disclosure of information on interest rate risk. • Threshold to identify institutions with threatening

interest rate risks (15% of Tier 1 capital).

Hearing until: 31 January 2018 Expected enactment of the regulations: April 2018 Expected entry into force: 1 January 2019

FINMA circular 18/3 ‘Outsourcing – banks and insurers’ (total revision)

• Replaces FINMA circular 08/7 ‘Outsourcing – banks’.

• Obligation to maintain a record of all outsourced services.

• Requirements of the circular apply to intra-group outsourcing. However, rules may be relaxed if risks are proven not to exist or requirements are not rele-vant.

• In case of outsourcing abroad, all the necessary data required in the event of restructuring, resolution and liquidation must be accessible in Switzerland at all times.

• Extension of the area of application to include insur-ance companies.

Entry into force: 1 April 2018 After entry into force: immediate application to new or modified outsourcing arrange-ments Transition period of five years to amend pre-existing outsourc-ing arrangements



FINMA Banking Insol-vency Ordinance (BIO-FINMA) (partial revision)

• Specifying the regulations that entered into force as of 1 January 2016 in art. 30a BankA and art. 12 para. 2bis BankO requiring banks to accept amend-ments to contracts or conclude new contracts that are subject to foreign law or a foreign place of juris-diction only if the contracting party acknowledges a postponement of the termination of contracts in ac-cordance with art. 30a BankA.

• Only applies to conventional contracts used for fi-nancial market transactions.

• Clarification that the revision has to be undertaken only for amendments to contracts or new contracts.

In force since: 1 April 2017 Transition periods up to 12 or 18 months af-ter entry into force of the provisions

FINMA FAQ ‘Consoli-dated supervision of banks and securities dealers’

• FAQ ‘Consolidated supervision of banks and securi-ties dealers’ deleted without replacement.

• Current FAQs on financial groups and conglomer-ates and on consolidated supervision will not be moved into a new circular.

• Current FINMA practice to continue unchanged.

Deletion of the previ-ous FAQ as of the end of January 2018

Fintech

Banking Act (BankA) (reducing the market entry barriers for Fintech compa-nies)

• Less stringent authorisation and operating require-ments for institutions not active in lending and in-vesting activities and with non-interest-bearing de-posits up to CHF 100 million and as well as lower requirements concerning minimum capital, equity and liquidity.

• Amendments to the BankA occur within the scope of the consultation of the Financial Services ACT (FinSA) and the Financial Institutions Act (FinIA).

Considered by the Council of States on 14 December 2016 and by the National Coun-cil on 13 September 2017 Expected entry into force: 2019

Banking Ordinance (BankO) (implementation of less stringent licencing require-ments for Fintech compa-nies)

• Implementation of less stringent authorisation for Fintech companies, expected to be inserted in the Banking Act by Parliament within the context of consultations on the Financial Services Act and the Financial Institutions Act.

Hearing expected from June to October 2018

Banking Ordinance (BankO) (reducing the market entry barriers for Fintech compa-nies)

• Extension of deadlines for settlement accounts from 7 to 60 days.

• Permitted to take deposits from the public up to a total of CHF 1 million without requiring a licence.

In force since: 1 August 2017



FINMA circular 08/3 ‘Public deposits with non-banks’ (amendments due to Fintech provisions)

• Amendment of the circular in light of the modifica-tions to the Banking Ordinance that entered into force 1 August 2017.

• Details added to the definition of settlement ac-counts.

• Additional explanation of whether taking public de-posits represents a commercial activity.

• Requirements concerning the obligation to inform clients if the undertaking operates in a sandbox by indicating that: − No supervision is performed by FINMA; and

− No deposit insurance is in place.


Other topics

Banking Act (BankA) (strengthening depositor protection)

• Measures to improve depositor protection:

− Period in which payments are made of insured deposits in the event of bankruptcy shortened to 7 working days;

− Securities deposit required equivalent to 50% of the payment obligation;

− No requirement to hold liquidity for potential cash outflows to the depositor protection scheme;

− The scheme’s upper system limit is to be in-creased to 1.6% of the total amount of insured deposits and at least CHF 6 billion.

• Introduction of the obligation to segregate proprie-tary assets and customers’ assets recorded in cus-tody accounts throughout the entire domestic ‘cus-tody chain’.

Hearing expected from August to November 2018

FINMA circular 08/1 • Circular has been repealed. • The authorisation and reporting requirements set

out in the circular will continue to remain intact.

Repealed as of 8 September 2017


Fund management companies/investment funds/ representatives of foreign collective investment schemes


SFAMA Guidelines for Money Market Funds (adaptation of 4 May 2016)

• Introduction of rules for valuation and liquidity management of money market funds.

• Regulation of potential postponement of redemption in fund contracts and statutes.

• Introduction of rules for creditworthiness of money market instruments.

• For money market papers held before 1 October 2016: Transition period of 300 days after entry into force of guideline for certain valuation rules.

In force since: 1 January 2017 Transition period until 28 October 2017 to adapt certain valua-tion rules

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