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Switzerland adopts revised banking regulations in order to facilitate the business activities of “FinTech” companies
On February 1, 2017 the Federal Council initiated a public consultation suggesting modifications to Swiss banking regulations. The purpose of the proposed revision was to create appropriate regulations for FinTech companies operating outside the traditional financial sector, taking into account the specific risk potential of their respective business models. The proposed revision included amendments to both the Banking Act (“BA”) and the Banking Ordinance (“BO”). The public consultation lasted until May 2017.
On July 5, 2017 the Federal Council finally adopted the new Swiss regulatory framework with regard to the BO. The new regime will formally enter into force on August 1st, 2017 so that FinTech companies will be able to benefit from these new rules as quickly as possible.
The amended rules provide for the following:
- Settlement account exemption: An exemption for settlement accounts will be created. This will allow companies to hold funds in a settlement account for 60 days without the operation of such account being deemed an acceptance of public funds subject to licensing under the BA (Art. 5 para 3 let. c BO). The BO in its current version did not contain a 60-day period of this kind, thereby creating some uncertainty.
- Innovation space (“sandbox”): Companies are allowed to hold public deposits of up to CHF 1 million without having to obtain a banking license (“sandbox”). Consequently, holding public funds of less than CHF 1 million does not qualify as “operating on a commercial basis”, which is a requirement in order to fall within the scope of the BA and the BO (Art. 6 para 2 let. a BO). According to the BO in its current version, taking public funds from more than 20 persons is deemed as “operating on a commercial basis”. Under the revised version of the BO, the number of persons providing funds is irrelevant as long as the threshold of CHF 1 million is not exceeded. Furthermore, the funds raised may neither be invested nor be subject to interest payments (Art. 6 para 2 let. b BO). Finally, the persons providing the funds must be informed that the respective business model is not subject to supervision by the Swiss Financial Market Supervisory Authority (FINMA) and that the rules on deposit insurance do not apply (Art. 6 para 2 let. c BO). This new innovation space will enable FinTech companies to try out experimental new business models without immediately having to obtain a banking license.
All in all, these innovative amendments to the BA and the BO will substantially facilitate the operation of FinTech business models in Switzerland. Moreover, the revision of the BA and the BO is further evidence of the Swiss government’s commitment to constantly improving and redesigning the regulatory environment in order to boost Switzerland as a major FinTech hub.
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