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Switzerland Completes Financial Services Regulator Review

by Ulrika Lomas, Lowtax.net, Brussels
02 January, 2015

The Swiss Federal Council has concluded that there is no fundamental need for comprehensive reform of the Financial Market Supervisory Authority (FINAMA), but has identified what it says are isolated areas where there is room for improvement.

FINMA is responsible for implementing the Financial Market Supervision Act and financial market legislation. It is an independent supervisory authority and is tasked with ensuring the proper functioning of the financial markets and with protecting the interests of creditors, investors, and insured persons. It has statutory authority over banks, insurance companies, stock exchanges, securities dealers, collective investment schemes, distributors, and insurance intermediaries. It also authorizes the operation of companies within the supervised sectors and ensures that institutions comply with the relevant regulations.

The Federal Council conducted a review of FINMA's regulatory and supervisory activities and adopted a final report on December 18, 2014. The Council found that FINMA's legal form, management structure, organization and financial resources, together with the division of responsibilities in relation to other authorities, is appropriate. In addition, it saw no need for action to be taken regarding the tasks assigned to FINMA.

The Council agreed that FINMA conducts its regulatory activities proportionately and takes appropriate account of the different business activities and risks of supervised parties. FINMA was also found to take sufficient account of the effect its regulation has on competition, the capacity for innovation, and the international competitiveness of Switzerland's financial center.

There was sporadic evidence that the ordinances and circulars issued by FINMA are not covered by the overarching provisions in Swiss laws and ordinances. The Council recommended that FINMA take appropriate steps to ensure that its ordinances and circulars have a sufficient legal basis. The Council likewise concluded that FINMA should increasingly assume its own supervisory activities and should critically assess the costs and benefits associated with high staff turnover.

The review also revealed that, while there has been no systematic misconduct with regard to the communication instruments available to FINMA, the notifications FINMA issues do frequently have content of a legislative nature. The Council has recommended that FINMA use these instruments sparingly and solely for communication purposes. FINMA must implement its communication policies consistently and define and adhere to internal processes, the Government concluded, adding that policies should also be examined periodically and adapted as and when appropriate.


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