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Alexander Vogel
Reto Luthiger
On 15 June 2018, the Swiss parliament passed an amendment to the Swiss Banking Act (BA) creating a new license category with simplified requirements (“fintech-license”). The introduction of a “fintech-license” is one of several measures proposed by the Federal Council to reduce market entry barriers for Fintech companies in Switzerland. The new provisions are expected to enter into force on 1 January 2019.
Reducing regulatory barriers for fintech companies in Switzerland
In February 2017, the Federal Council initiated a fintech consultation, which contained three measures to promote innovation in the financial sector and remove barriers to market entry for fintech companies. Two of the promoted measures, the extension of the holding period for settlement accounts and the license-free innovation area (“sandbox”) were already brought into force on 1 August 2017 with an amendment to the Banking Ordinance (BO) (see MLL-News of 17 July 2017, MLL-News of 27 June 2017, MLL-News of 15 February 2017).
Current legislation
Under the current legislation, a banking license is inter alia required for any company which accepts deposits from the public on a commercial basis (art. 1 para. 2 BA). The acceptance of deposits is deemed commercial if 20 or more deposits are accepted (art. 6 para. 1 BO). The definition of “deposits” is broad; all external funds received in the course of business qualify as deposits in the sense of the BA and the corresponding ordinance with a few exemptions (e.g. deposits from domestic or foreign banks or other state-supervised entities, cf. art. 5 BO).
The “sandbox” concept, in effect since August 2017, has already softened the strict regime with regards to the acceptance of deposits from the public “on a commercial basis”. According to the “sandbox” concept, there is no commercial activity despite the acceptance of more than 20 public deposits if the sum of the public deposits is below CHF 1 Mio., the public deposits are neither invested nor paid interest and the depositors are informed that there is no supervision by FINMA in place and that the deposits are not covered by the deposit guarantee (cf. art. 6 para. 2 BO).
New „fintech-license“
The new license pursuant to art. 1b BA allows companies to accept public deposits of up to CHF 100 Mio. on a commercial basis. The requirements of the BA apply mutatis mutandis to the new license holders. Compliance with these requirements is monitored within the on-going supervision by FINMA, which is also responsible for the supervisory sanctions of misconduct.
The license is subject to various conditions. The companies are obliged to forward the collected funds in accordance with the relevant customer agreement or – if this is not the purpose or impossible – to reimburse the customer. If immediate forwarding is not possible or not provided for in the customer agreement, the company may keep the deposits with it. This “holding” of deposits is not subject to any time limits, but to certain conditions. The deposits must be kept in custody in the interest of the customers and may neither be invested nor bear interest during this period. Additionally, the license holders must meet certain requirements for their organisation, risk management, compliance and financial resources and have their activities audited by an authorised audit firm (cf. Art. 1b Para. 4 BA). In all other respects, they must also comply with the provisions of the BA and its ordinances mutated mutandis (cf. Art. 1b para. 1 BA). However, due to the differences between actual banks and “fintech license” holders the BA and its ordinances shall only be applied to the extent that they are appropriate.
Open for different business models
Despite its name, the new licensing category is not limited to certain fintech business models or to the fintech area itself. Although the primary purpose of the new regulation was to lower the market entry barriers for FinTech companies, the provision generally applies to all “persons who are active in the financial sector” (cf. Art. 1b para. 1 BA). This means that also companies outside the fintech sector may obtain a “fintech license”.
Consultation on amending the Banking Ordinance
In order to implement the legislative amendments, the Banking Ordinance must be amended. Therefore, the Federal Department of Finance (FDF) FDF initiated a corresponding consultation on 21 June 2018. It will run until 21 September 2018. In the interests of the market participants concerned, the new rules should thus be able to come into force already on 1 January 2019.
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