FINMA Published New Circular “Outsourcing – Banks and Insurers”

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On December 5, 2017 the Swiss Financial Market Supervisory Authority (“FINMA”) published its Circular 2018/03 “Outsourcing – banks and insurers”, which introduces changes for banks and covers for the first time also insurance companies The revised outsourcing circular will enter into force on 1 April 2018.

Principle-based regulation

With the revised outsourcing circular, FINMA uses a principle-based and technology-neutral approach. Accordingly, banks, securities dealers and insurers can implement the requirements for outsourcing in such a way that their specific business models and risks are taken into account.

FINMA in particular requires financial institutions to take the higher risks resulting from the outsourcing of activities outside of Switzerland into account. In this regard, financial institutions must guarantee company restructuring and resolution in Switzerland.

Issues raised by market participants

FINMA took on the following key suggestions from banks, securities dealers, insurance companies and directly affected companies during the consultation process and implemented them as follows in the revised outsourcing circular:

  • It defined the materiality of outsourcing projects in a more principle-oriented way and, thus, strengthened the institutions’ independent self-assessment;
  • clarified the rules governing the outsourcing of risk management and compliance functions;
  • allowed for principle-oriented treatment of intra-group outsourcing;
  • deliberately refrained from regulating special implementing provisions for systemically important banks; and
  • extended the transition period for adjustments to existing outsourcing arrangements for banks from two to five years. In the case of insurers, the revised outsourcing circular will apply from the date of entry into force to all new licensed businesses as well as in the event of business plan changes.

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Günther Dobrauz
Leader PwC Legal Switzerland
+41 58 792 14 97

Tina Balzli
Head Banking, Legal FS Regulatory & Compliance Services
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Jean-Claude Spillmann
Senior Manager
Legal FS Regulatory & Compliance Services
+41 58 792 43 94

Stephanie Kok
Legal FS Regulatory & Compliance Services
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Michaela Brunnhofer
Legal FS Regulatory & Compliance Services
+41 58 792 47 94

Published by

Guenther Dobrauz

Guenther Dobrauz

Guenther Dobrauz
Leader PwC Legal Switzerland
Birchstrasse 160
Postfach, 8050 Zurich
+41 58 792 14 97

Guenther leads PwC Legal in Switzerland and the Legal FS Regulatory & Compliance Services department. He is a PwC Partner since 2015 and a global expert on legal advisory, specializing in supporting the structuring, authorization and ongoing lifecycle management of financial intermediaries and their products. He in particular also focuses on leading large scale regulatory change and compliance alignment projects.

Guenther is the author of books on investment selection, FinTech Regulation and European, Swiss and Liechtenstein investment law. He also wrote 80+ publications in international expert magazines and has to date been speaking at more than 60 conferences worldwide.

Guenther Dobrauz received his Masters and PhD degrees in law from Johannes Kepler University (Linz, Austria). He holds an MBA from the University of Strathclyde Graduate School of Business (Glasgow, UK) and has participated in Harvard Business School’s Executive Education Program.

Guenther Dobrauz was Legal Counsel of an international hedge fund group and served as Managing Partner and Legal Counsel of a Swiss Venture Capital firm. He has practiced in court and with a leading business law firm.