12 July 2017 / news

Regulatory relaxations for Swiss Fintechs

The Swiss Federal Council has decided on the regulatory amendments of the Banking Ordinance that implements its strategy to decrease barriers to market entry for Fintech firms and strengthen the competitiveness of the Swiss financial center. One of the measures is that acceptance of public funds will become easier.

The regulatory relaxations decided by the Swiss Federal Council are available not only for Fintech firms, but also for established financial intermediaries. The new regulation introduces a risk based regulatory approach for firms that provide services other than the traditional banking services (deposit taking). It contains the following two main features:

  1. The deadline for the holding of money in settlement accounts without the need for a banking license will be prolonged from 7 days to 60 days. This amendment will be of particular value for companies in the area of crowdfunding platforms, but can also be of relevance for payment service providers.

  2. A “sandbox” for the acceptance of public funds up to a total value of CHF 1 million without the need for authorization or monitoring by FINMA will be introduced. However, AML provisions remain reserved and the public has to be expressly informed that their deposits are not insured. This amendment will allow companies to test new business models without unnecessary formalities, as long as the company operates within the framework of the sandbox. In particular, and in contrast to similar initiatives in other countries, no admission procedure by FINMA is required and no maximum duration period is prescribed.

The amendments will enter into force on 1 August 2017.

Introduction of a Fintech license

A third amendment provided for by the Fintech strategy, the introduction of a Fintech license, is still pending in parliament. Under this license, less stringent regulatory requirements for licensing and operation shall apply. In return, the acceptance of public funds shall be restricted to CHF 100 million and the investment of the funds or the payment of interest shall not be allowed.

The Council of States has approved the mentioned amendments last winter, the National Council is due to discuss them in the autumn session in the realm of the discussion of the Financial Services Act and the Financial Institutions Act.

Switzerland: one of the first countries with Fintech regulation

While certain regulatory questions regarding recent developments such as virtual currencies and robo advisory are still open, these measures ensure that Switzerland is one of the first countries to introduce specific Fintech regulation. This promotion of new technologies will make the Swiss financial center even more attractive for potential market players as well as investors.