Interview FINMA: regulating progress

Finma: FINMA was pretty quick to clearly define how to manage crowdfunding and Bitcoins. Corresponding information was published in the annual reports and specific fact sheets in 2012 and 2013. The questions asked by fintech companies are very different. They relate to unusual, complex, and at times new legal issues. FINMA is of course very aware of the situation applicants find themselves in when applying for licenses. New processes have now been implemented to make the application process more efficient and as speedy as possible. However, those who are more accustomed to quick click-and-go processes are still unlikely to be happy with the results. It will take time to fully resolve these issues.

You can’t compare apples with oranges. FINMA will send a quick response to simple queries, too. The difference lies in the complex license applications, which can take more than eight months. In these cases, a fasttrack procedure with a 24-hour turnaround just wouldn’t be realistic.

Fintech is a very broad term which describes numerous technological innovations in the financial sector.

FINMA welcomes innovation from new and established companies in the financial sector, but maintains a neutral position on individual business models or technology. Still, it considers innovation in general to be an important factor in maintaining Switzerland’s competitiveness as a financial center. This is why FINMA is paying close attention to developments here, at both a strategic and technical level.

As part of its efforts to reduce barriers, FINMA is particularly considering whether and how the scope of activities for which no license is required could be more clearly defined, and perhaps slightly extended. It may be possible to create a form of development environment, in which new business models could be tested on a small scale with manageable risks – a ‘regulatory sandbox’ of sorts. However, such a thing would also be affected by any possible future changes to Swiss banking legislation.

FINMA has suggested a ‘light’ banking license, which would have lower requirements than those currently stipulated under the Swiss Banking Act. This new category of license would be open to anyone who is interested – so more than just fintechs. That said, an easier licensing process must be subject to two conditions. First, the institute must be working with smaller volumes. Second, the institute must not be permitted to perform any maturity transformations. This means that longterm loans cannot be granted on the basis of short-term deposits. This restriction eliminates both the liquidity risk and interest rate risk. The customers’ financial risks and their protection requirements are therefore much lower than they would be with a traditional bank. Any necessary changes to the law or regulations must of course be made by the legislator and Swiss Federal Council respectively.

No, not yet.

It is true that a number of issues gained much visibility over the past year. FINMA’s efforts are focused on removing the barriers to fintech companies, ensuring regulations are technology-neutral, and maintaining contact with market participants.

FINMA has a central contact point that handles all queries. FINMA also has created platforms in some areas to support this dialogue, and takes part in some external events. For example, FINMA will be holding a roundtable event on fintech-specific issues for all interested parties in 2016.

FINMA has been in contact with both established market participants and potential new fintech competitors for many years. Their needs, as well as their experience with matters relating to supervisory law, are of course different. Some business models or activities naturally mean there are more questions relating to possible violations of the Swiss Money Laundering Act, and in other cases it is more about their activities as a bank. It is always es-sential for FINMA to precisely understand the business model or the technology used so that it can make a proper assessment.

FINMA considers innovation in general to be an important factor in maintaining Switzerland’s competitiveness as a financial center. FINMA was also quickto develop its practices on how to deal with business models that are based on Bitcoins.

FINMA is following this matter closely and is in communication with the industry regarding the regulatory requirements.

The ‘light’ banking license is intended to make things easier in scenarios exactly like this. However, it is the legislature and the Swiss Federal Council who have the final say.

The agenda is set by the Swiss Federal Council. We have no influence on this, and so we do not have any relevant information, either. Thank you for these informative responses. We really appreciate you taking the time to share your insights.