Swiss Federal Council Finalizes Amendment To Banking Ordinance

On July 5, 2017, the Swiss Federal Council (the Council) implemented an amendment to the Swiss Banking Ordinance (BankO) that will go into effect on August 1, 2017. The amendment, which was originally suggested in February 2017, aims to lower the market obstacles that FinTech firms face, and regulate services that operate outside normal banking business according to their risk potential. To facilitate this, the Council will make two revisions to the BankO.

First, the Council has extended the grace period that applies explicitly to settlement funds to 60 days instead of seven. Currently, deposits made into settlement accounts of market participants don’t qualify as public deposits if they are interest-free and/or resolve client transactions within seven days. This revision benefits crowdfunding platforms, such as token offerings, which take investor funding to finance projects and then proceed to transfer the funds to the venture within a preset time.

The Council has also agreed to introduce a sandbox in order for firms to test out new business models before having to obtain commercial authorization. As a result, firms will be allowed to accept public funds from more than 20 persons up to 1 million Swiss francs before being classified as a commercial entity, so long as they don’t re-invest those deposits. However, the Council requires firms to issue warnings that deposits are not protected by FINMA.

A separate amendment, concerning the Banking Act (BankA), the Financial Services Act, and Financial Institutions Act, was proposed in December 2016. In this case, the Council promoted the formulation of a new authorization category for BankA companies that accept public funding up to 100 million Swiss francs, but do not invest or pay interest on those funds. The Council recommended that firms within the new category should have simplified authorization and operation requirements in the areas of accounting, auditing, and deposit protection. Swiss officials will debate moving forward on the proposal this autumn in the National Council.

Nevertheless, the Federal Council states it will continue to observe developments within the emerging FinTech industry. This includes “swiftly pursuing” the legal status of virtual currencies. In addition, the Council elaborated that the amendments were put in place, not just for emerging FinTech firms, but established financial service providers as well. “Banks should also be able to use the innovation area. This will ensure that the competition amongst the financial market participants is not distorted.”