SWITZERLAND Law and Practice Contributed by: Judith Raijmakers and Florian Thomas Willi, Loyens & Loeff
are supervised on a preventive basis, but do not require close and continual supervision. On the other end of the spectrum, category 4 and 5 banks are supervised mostly on the basis of quantitative indicators and only looked at on an event-driven basis (ie, when rules are breached). Category 4 and 5 banks can opt into a “small- bank” regime (SBR) if they fulfil certain condi - tions. To benefit from the relief measures of the SBR, a bank in category 4 or 5 must meet the following criteria (as set out in the CAO) at all times (i) at the level of the individual institution, and (ii) at the level of the financial group: • refinancing rate of at least 100%; • average liquidity coverage ratio (LCR) (assessed over a period of 12 months) of at least 110%, and • simplified leverage ratio of at least 8%. The FINMA can reject an application for the SBR in certain cases, for example, if supervi - sory measures or proceedings have been initi - ated against the bank. Banks may also lose the benefits of the SBR regime if they fail to remedy deficiencies within a reasonable period of time or if FINMA conducts enforcement proceedings against them for breaches of supervisory law. SBR banks benefit from simplified requirements for calculating their capital and liquidity. In par - ticular, they benefit from less stringent require - ments for quality and quantity of the necessary capital, which includes the elimination of the calculation of risk-weighted assets (RWA), elimi - nation of the capital buffer, as well as the elimi - nation of the sectoral countercyclical buffers (CCB). Further, calculation of and compliance with the net stable funding ratio (NSFR) are not
required. In addition, there are some qualitative relaxations in the FINMA circulars. By the end of 2023, 54 banks participated in the SBR. This is a fourth of all category 4 and 5 banks. Costs for market entry of entities apply - ing for a banking licence have decreased as a result of the SBR regime. For existing banks, costs have – according to an evaluation by FIN - MA – not been reduced to the expected level. The reason is that most banks have already put in place an expensive infrastructure to comply with the “full requirements”. It is, however, likely that the simplified requirements for banks will, over the longer term, lower costs for existing banks participating in the SBR regime. Overview: Application Process Before submitting a licence application, the applicant must first present the project to FINMA for preliminary review. For this purpose, a pres - entation must be submitted containing, inter alia, the following: • business model and description of the regu - lated activity; • financial resources and origin of the funds (based on current figures); • intended setup (ie, organisation); • overview of the group structure, if applicable; • timetable; and • power of attorney (if represented). Preliminary assessments of licensing projects are subject to a fee. The licence application needs to be submit - ted via the web-based Survey and Application Platform (EHP). To use the EHP platform, a one- time self-registration on the FINMA portal must be made and an application completed. Once FINMA has reviewed the application, templates
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