28.06.2024, Enrico Giacoletto

The purpose of this post is to succinctly present the main news concerning the regulatory changes impacting Swiss banks in the month of June 2024. This spring has been full of announcements: some concern changes that will have a rapid impact, while others will have an impact in the more distant future and will be dealt with in the final chapter. Announcements of future developments without an effective date, or likely to be significantly modified, are left aside here in order to focus on changes with more certain effective dates*.

During the first half of 2024, two new FINMA circulars were put out to consultation:

• The new FINMA circular " Rules of conduct under the LSFin and OSFin", the hearing for which began on May 15 and will run until July 15, 2024. The draft circular is intended to come into force in January 2025. FINMA wishes to make its practice transparent with regard to certain aspects of the rules of conduct under LSFin and OSFin. The draft circular specifies:
• certain disclosure requirements (notably concerning the concept of unusual risk concentrations and the applicable thresholds);
• certain instructions to be observed when checking suitability and adequacy ;
• minimum disclosure requirements for securities lending; and
• various considerations concerning the management of conflicts of interest and retrocessions.
• The new FINMA circular on nature-related financial riskswhich closed for consultation on March 31, and which was discussed in our our previous post. It is due to come into force on January 1, 2025, with transitional provisions.

The main announcements * with an effective date between now and early 2025 are as follows:

• Tightening the minimum reserve requirement: on April 22, 2024, the SNB announced various changes to the calculation of the minimum reserves that banks must hold (see articles 12 to 15 of the OBN). The main change is that the minimum reserve requirement has been increased from 2.5% to 4% of decisive liabilities. According to the SNB's calculations, this is likely to reduce the amount of interest it has to pay on banks' deposits with the SNB.

• New threshold for trustees: In its communication 01/2024 of February 2, FINMA informed that, following a decision by the Federal Criminal Court, a new threshold applies to determine whether a trustee is carrying out his activity in a professional capacity and is therefore also subject to authorization (see art. 19 OEFin). This new threshold is reached when the assets of trusts exceed five million Swiss francs at any one time (see chapter 3 of the communication). Trustees who are now subject to the authorization requirement under the LEFin will have to file an application for authorization with FINMA by the end of 2024 and register with FINMA by the end of June 2024. This will entail a number of considerations for banks. In particular, they will need to ensure that, if the bank works with a newly-licensed trustee, the latter complies with these new obligations.

• Cyber risk management : FINMA regularly stresses the importance of this topic. On June 7, 2024, FINMA published the findings of its cyber risk monitoring activities. In its communication 04/2024, the FINMA clarifies the reporting obligation of reporting entities in the event of cyber attacks, and the cyber exercise scenarios to be considered. This FINMA communication is particularly important, as it clarifies FINMA's minimum expectations.

• Eco-money laundering: the Federal Council announced its approach on June 19. For the time being, it will " refrain from drafting state regulations " on money laundering, in view of the new provisions published by the Swiss Bankers Association (SBA), the Asset Management Association Switzerland (AMAS) and the Swiss Insurance Association (SIA). This topic will be covered in greater detail in a future post. The press release also provides a definition of greenwashing: " Greenwashing is when customers are misled about the sustainability of financial products and services.. ".

• Basel 3 final: on June 26, 2024, the Federal Council confirmed that the amended Capital Adequacy Ordinance (CAO) would come into force on January¹, 2025, despite delays in some countries. This topic will be the subject of a future post. Readers wishing to find out more can read this text on Basel 3 final in Switzerland.

Other important announcements concern more distant deadlines (2026):

• Law on the Transparency of Legal Entities (LTPM): The Federal Council has forwarded the message of the draft law to Parliament. The bill is still subject to change until it comes into force, scheduled for 2026 at the earliest. At this stage, it provides, among other things, for the introduction of a federal register of beneficial owners and increased due diligence obligations for high-risk legal professions.

• Consultation on the extension of automatic international exchange of information (EIA) in tax matters to crypto-assets: On May 15, 2024, the Federal Council decided to put out to consultation its project for the extension of automatic international exchange of information in tax matters (EIA). The project concerns the implementation of the new standard on EAR relating to cryptoactives and the amendment of the standard on EAR relating to financial accounts. The new provisions will come into force on January 1, 2026. The consultation procedure runs until September 6, 2024.

• Consultation on updating the LIMF: in order to take account of recent technological developments, changes in foreign law and various other considerations, a draft amendment to the LIMF was put out to consultation on June 19, 2024. Among the (many) different amendments introduced, the following are of particular interest:

• With regard to rules of conduct on financial markets, the draft incorporates into the law several provisions currently covered by FINMA circular 2013/8 "Rules of market conduct for securities trading", aimed at improving the prevention, detection and punishment of insider trading and other abusive and manipulative market practices.
• The bill reiterates and strengthens FINMA's role in monitoring and reporting suspicions of market manipulation.
• Relief for small non-financial compensations is introduced in the law.

The changes already discussed in the previous post are not repeated.

* The choice of subjects is an editorial choice of the author and is provided without any claim to exhaustiveness or otherwise.

Enrico Giacoletto, CFA, FRM

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