Federal Act on Banks and Savings Banks (Switzerland)

Federal Act on Banks and Savings Banks (Switzerland)
Title	Federal Act on Banks and Savings Banks
Legislature	Federal Assembly of Switzerland
Long title	Federal Act on Banks and Savings Banks (Bankengesetz)
Enacted by	National Council (Switzerland) and Council of States (Switzerland)
Date assented	1934
Status	in force

Federal Act on Banks and Savings Banks (Switzerland) is the principal statute governing banking activity in Switzerland, establishing licensing, capital, supervision, and secrecy rules that have shaped Swiss financial practice. The Act provides the legal foundation for the relationship between banks and regulatory bodies such as the Swiss National Bank and the Swiss Financial Market Supervisory Authority. Over decades the Act has been amended to respond to international standards set by bodies like the Financial Action Task Force and the Basel Committee on Banking Supervision.

History

The Act was adopted by the Federal Assembly of Switzerland in the aftermath of the banking crises of the early 1930s and the global financial instability surrounding the Great Depression. Influences included jurisprudence from the Federal Supreme Court of Switzerland and precedents from banking law in Germany, France, and United Kingdom. Early twentieth-century cantonal banking statutes and the collapse of institutions linked to the Kreuzlingen banking crisis contributed to the draft legislation debated in the National Council (Switzerland) and the Council of States (Switzerland). Subsequent historical milestones affecting the Act include responses to the World War II financial environment, the Swiss bank secrecy controversies involving United States of America tax authorities, and multilateral negotiations with the Organisation for Economic Co-operation and Development.

Scope and Objectives

The Act defines authorized activities for institutions such as Credit Suisse Group AG, UBS Group AG, cantonal banks including Zürcher Kantonalbank, and regional savings banks like Raiffeisen Switzerland. Objectives include prudential supervision as reflected in standards promoted by the Basel Committee on Banking Supervision, consumer protection noted by the Federal Department of Finance (Switzerland), and maintaining stability in coordination with the Swiss National Bank. The statute delineates licensing procedures affecting entities such as PostFinance and distinguishes between deposit-taking banks and non-bank financial intermediaries registered with the Financial Market Supervisory Authority (FINMA). It seeks to align Swiss practice with international instruments such as treaties negotiated by Switzerland within the United Nations framework and cooperation frameworks with the European Union.

Key Provisions

Key provisions cover licensing requirements examined by FINMA, capital adequacy inspired by Basel III accords promulgated by the Basel Committee on Banking Supervision, liquidity rules connected to central bank facilities at the Swiss National Bank, and risk management duties paralleling corporate governance standards seen at Nestlé S.A. and Novartis International AG. The Act historically codified bank secrecy protections, influencing litigation involving parties like United States Department of Justice and multinational corporations such as Glencore. Provisions address deposit protection schemes analogous to systems in Germany and France and prescribe requirements for internal controls and anti-money laundering obligations referenced by the Financial Action Task Force. Specific articles allocate supervisory competences, set criminal penalties for breaches akin to statutes enforced by the Federal Office of Justice (Switzerland), and authorize cooperation with foreign supervisors such as the Securities and Exchange Commission.

Regulation and Supervisory Framework

Supervision under the Act is exercised principally by FINMA in coordination with the Swiss National Bank and cantonal authorities including the Canton of Zurich financial office. The regulatory framework incorporates international standards from the Basel Committee on Banking Supervision and aids cross-border oversight through memoranda of understanding with agencies like the European Central Bank and the Bank of England. Supervisory tools include licensing, on-site inspections, enforcement actions similar in scope to those pursued by the Federal Trade Commission in the United States of America, and resolution planning inspired by the Financial Stability Board. The Act enables FINMA to require reporting comparable to disclosure obligations filed with the Securities and Exchange Commission by public banks listed on the SIX Swiss Exchange.

Impact on Swiss Banking System

The Act has been central to the development of Zurich and Geneva as international financial centers hosting banks such as UBS Group AG and Credit Suisse Group AG. Its combination of prudential oversight and confidentiality provisions historically attracted private banking clients from places like Italy, Spain, and Brazil. Regulatory certainty fostered capital accumulation that benefited Swiss industries including ABB Group and Roche Holding AG through financing activities. Criticisms from institutions like the European Commission and litigants including the United States Department of Justice prompted reforms altering the balance between secrecy and transparency, affecting cross-border banking relationships with jurisdictions such as the United Kingdom and Germany.

Amendments and Legislative Developments

Major amendments include reforms implemented in response to international pressure during negotiations with the United States of America in matters involving tax evasion and mutual legal assistance, legislative changes to integrate Basel III capital standards endorsed by the Basel Committee on Banking Supervision, and updates following recommendations by the Financial Action Task Force. Recent legislative developments involved parliamentary debates in the Federal Assembly of Switzerland and proposals from the Federal Department of Finance (Switzerland) to adjust resolution powers in line with the Financial Stability Board guidance. Ongoing dialogues with the European Union and bilateral accords continue to shape amendments affecting cross-border regulatory cooperation with authorities like the Prudential Regulation Authority.

Category:Swiss federal legislation Category:Banking law