www.pwc.ch
Swiss Federal Council to reduce
barriers to market entry for
fintech firms
Contacts
Günther Dobrauz
Partner
Leader Legal FS Regulatory and
Compliance Services
+41 58 792 14 92
[email protected]
Simon Schären
TLS Manager
Legal FS Regulatory and Compliance
Services
+41 58 792 14 63
[email protected]
1)
Background and overview
The Federal Council (FC) today published a strategy paper that outlines a “three-step
plan” to adjust the current financial regulatory framework in Switzerland to the
business reality of the fintech industry. According to the FC, the easing of the
regulatory framework shall substantially reduce barriers to market entry for providers
in the fintech area. Furthermore, the FC instructed the Federal Department of Finance
(FDF) to prepare a consultation draft in order to implement the proposed steps,
thereby particularly amending the Banking Act (BA) and the Banking Ordinance (BO).
This initiative by the FC is in line with and complements many recent actions taken by
various Swiss regulators, including the Financial Markets Supervisory Authority
(FINMA), to improve the standing of the Swiss fintech hub in the international
competition for modern and attractive regulatory environments.
2)
Elements of the “three-step plan”
a.
First element: Settlement accounts for crowdfunding platforms
and other ventures
According to the current system, Art. 5 para 3 lit. c FBO exempts settlement accounts
of securities dealers, precious metal traders, asset managers or similar firms from the
scope of the FBA which solely serve the purpose of settling client transactions and on
which no interests are paid. Such accounts are not deemed deposits in the sense of the
BA. However, according to FINMA practice, said accounts will only be exempted if
funds are not held longer than seven days. This timeframe turned out to be too short
for fintech entrepreneurs and institutions, in particular in the crowdfunding sector.
Therefore, the FC proposed to amend the BO in order to generally enable institutions
to hold money in settlement accounts for a period of 60 days. This amendment would
be applicable to firms with settlement accounts in general and not only for operators
of crowdfunding platforms.
b.
Second element: Innovation area (“Sandbox”)
Currently, funds taken from more than 20 depositors will be qualified as deposits and
will trigger a bank licence requirement under the BA unless an exemption applies (Art.
5 and 6 BO). In business reality an in the enforcement practice of FINMA, firms often
collide with this restriction as the intake of deposits forms part of many financial
activities. In line with international regulatory developments and trends, FINMA has
recently outlined a plan to enable fintech firms to perform authorisation-exempt banklike activities in an innovation area in the sense of the regulation called “Sandbox”. In
its proposal, the FC adopts this vision and suggests amending the BA accordingly.
A provider operating in the exempted innovation area would be allowed to raise public
funds without restriction and up to a total value of CHF 1 Mio. Such fundraising would
not be deemed deposits in the sense of the BA. However, as soon as the threshold of
CHF 1 Mio. is exceeded or if funds are taken from more than 20 depositors, a special
FINMA licence would be required (see 2.c. below). All relevant provisions of the AntiMoney Laundering Act (AMLA) would, however, remain to be applicable in any case.
For the sake of transparency, all firms operating in the exempted innovation area
should inform their client about the fact that their operations are not subject to
FINMA supervision.
c.
Third element: “FinTech licence” to be granted by FINMA
Finally, the FC proposes the creation of a new licence category for institutions that are
not operating in the lending business (maturity transformation) and are therefore
restricted to simple deposit taking. Here, according to the proposal of the FC, a licence
should be available with less stringent regulatory requirements than the regular bank
licence provides. Accordingly, a firm holding such a special licence may accept public
funds up to CHF 100 Mio. even if these qualify as deposits in the sense of the BA.
Under the condition that the protection of the individual client is guaranteed by
special requirements, FINMA may grant an exemption in order to hold a higher
threshold than
CHF 100 Mio. Firms holding such a special licence would be required to hold a
minimum capital of 5% of the accepted funds but not less than CHF 300,000. All in all
the new FinTech licence as proposed by the FC would be unique and unparalleled by
international standards.
3)
Next steps and outlook
The FC has instructed the FDF to draw up a consultation draft implementing the
proposed legislative changes and amendments. The draft shall be available by the start
of 2017. The FC has also asked the FDF to clarify and align with relevant stakeholders
if additional regulatory adjustments should be made in order to remove further
barriers on market entry for fintech firms and entrepreneurs.
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