The new Swiss light banking license For FinTech companies is effective as of 1 January 2019.
Switzerland intends to simplify the regulatory requirements for Fintech companies which accept public deposits, including but not limited to payment providers, blockchain based companies and crowdfunding platforms. This regulatory simplification, which was implemented on 1 January 2019, shall allow for, among other things, a “Swiss light banking license”. The Swiss light banking license will greatly reduce the regulatory and financial requirements for FinTech companies which accept public deposits.
As it currently stands, the operations of many FinTech companies fall within the scope of the Swiss Banking Act and therefore require a full Swiss banking license from FINMA, the Swiss Financial Market Supervisory Authority. The full Swiss banking license carries quite a financial and organizational burden, which has kept many companies out of the Swiss market. For this reason, the Swiss Federal Council and Swiss parliament intend to create a legal framework for FinTech companies.
The new regulations include a “sandbox”, allowing FinTech companies to accept deposits up to a maximum of CHF 1 million without a banking license, so long as such assets are not invested or interest bearing. The Swiss instrument is available for all market participants, is unlimited in time and does not provide for supervision by FINMA.
“Swiss Light Bank License”
If the CHF 1 million sandbox threshold is exceeded, the new framework provides for a “Swiss light bank license”, which shall allow deposits up to CHF 100 million, with certain additional requirements, as summarised below.
Requirements of the “Swiss Light Bank License”
As with the sandbox requirements, where FinTech companies are utilising the Swiss light bank license:
- Deposits up to CHF 100 million shall be allowed, at any given time (FINMA might grant exemptions in some cases and under certain conditions)
- The deposits cannot be invested
- The deposits cannot bear interest.
- Companies cannot use the term “Bank” in their name or in connection with their activities.
- Like the full banking license, confidentiality obligations (“banking secrecy”) and AML-KYC due diligence obligations shall apply.
Relaxations of the “Swiss Light Bank License”
- The Swiss banking license “light” has relaxed accounting and auditing standards applying the general standards of the Swiss Code of Obligations.
- Compliance audits can be carried out by an auditing firm subject to less stringent authorization requirements.
- Deposit insurance provisions do not apply. But companies under the Swiss light bank license must notify all customers that they do not carry such insurance prior to accepting their deposit.
- Companies benefiting from the Swiss light bank license have a reduced capital requirement in the amount of CHF 300,000, or 5% of their total deposits, whichever is greater.