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FINMA Guidance 06/2020: prolongation/end of exemptions
May 20, 2020 | Financial Market News
FINMA Guidance 06/2020: prolongation/end of exemptions
On May 19, the Swiss Financial Market Supervisory Authority FINMA published further Guidance 06/2020 in the context of the COVID-19 situation providing some changes to the exemptions implied to the phases and clarified how the net stable funding ratio (NSFR) is calculated.
In Notice 02/2020 dated March 31, 2020, due to the fact that the banks were affected by the COVID-19 pandemic and which effected the real economy, FINMA granted three reliefs until July 1, 2020.
Firstly, clients still have unusually high deposits with Swiss banks. The relief in the leverage ratio (except for central bank balances) will, therefore, be extended until January 1, 2021, for all banks. These regulatory flexibilities align with previously introduced frameworks such as the Small banks regime, which also aimed to reduce operational burdens during financial stress periods. In the case of dividend distributions, the reduction in the relief stated in Notice 03/2020 continues to apply.
Secondly, the relief in the area of risk distribution ends on July 1, 2020.
Thirdly, the relief in the area of backtesting exceptions in the form of a freeze until tFebruary 1, 2020, is generally adopted in future supervisory practice.
In Notice 02/2020 dated March 31, 2020, due to the fact that the banks were affected by the COVID-19 pandemic and which effected the real economy, FINMA granted three reliefs until July 1, 2020.
Firstly, clients still have unusually high deposits with Swiss banks. The relief in the leverage ratio (except for central bank balances) will, therefore, be extended until January 1, 2021, for all banks. These regulatory flexibilities align with previously introduced frameworks such as the Small banks regime, which also aimed to reduce operational burdens during financial stress periods. In the case of dividend distributions, the reduction in the relief stated in Notice 03/2020 continues to apply.
Secondly, the relief in the area of risk distribution ends on July 1, 2020.
Thirdly, the relief in the area of backtesting exceptions in the form of a freeze until tFebruary 1, 2020, is generally adopted in future supervisory practice.
Loans and Funding Rate (NSFR)
For the funding rate (Net Stable Funding Ratio, NSFR), the Refinancing Facility (CRF) related loan without considering the termination option of the SNB can be regarded as identical to the term of the claim assigned as security.
Ease of AMLA identification
With the supervisory Notice 03/2020 dated April 7, 2020, FINMA based on Art. 17 of the Anti - Money Laundering Act (AMLA; SR 955.0) in conjunction with Art. 3 Para. 2 of the Anti - Money Laundering Ordinance, FINMA (AMLA-FINMA; SR 955.033.0) facilitated the opening of new clients' relationships.
The current developments allow a gradual return to previous opening process. It should be taken into account that the subsequent inspection of the original ID or the subsequent collection of the authenticity copies of ID takes time and that the situation depends on the client's domicile or the individual situation of the client. Much like the Sustainable finance reaction, these adaptations sparked a mixed response in the industry regarding proportional regulation. Similarly, institutions must not overlook urgent obligations like FINMA cyber reporting, which remains essential even during broader economic relief measures.
The current developments allow a gradual return to previous opening process. It should be taken into account that the subsequent inspection of the original ID or the subsequent collection of the authenticity copies of ID takes time and that the situation depends on the client's domicile or the individual situation of the client. Much like the Sustainable finance reaction, these adaptations sparked a mixed response in the industry regarding proportional regulation. Similarly, institutions must not overlook urgent obligations like FINMA cyber reporting, which remains essential even during broader economic relief measures.
The relief until July 1, 2020, is among the prerequisites formulated in the FINMA Supervisory Notice 03/2020 extended with the following adjustments:
- For new openings for which the relief according to supervisory Notice 03/2020 was used until July 1, 2020, or still has, the authentication has to be at the latest within 120 Days (instead of 90 days) since the relationship opened
- For new openings with clients with foreign domicile can also relief from July 1, 2020, to October 1, 2020, as formulated in the supervisory Notice 03/2020. The confirmation of authentification should be made within 120 days of the latest to open the relationship. Parallel regulatory changes, such as the Income tax modernization, further reflect Switzerland’s broader fiscal responsiveness amid the COVID-19 recovery.
- If authenticity confirmations due to specific restrictions related to COVID-19 measures can not be taken within the adjusted deadlines, this must be documented in individual cases. The authentification in these cases has to be done as soon as possible.
- For new openings for which the relief according to supervisory Notice 03/2020 was used until July 1, 2020, or still has, the authentication has to be at the latest within 120 Days (instead of 90 days) since the relationship opened
- For new openings with clients with foreign domicile can also relief from July 1, 2020, to October 1, 2020, as formulated in the supervisory Notice 03/2020. The confirmation of authentification should be made within 120 days of the latest to open the relationship. Parallel regulatory changes, such as the Income tax modernization, further reflect Switzerland’s broader fiscal responsiveness amid the COVID-19 recovery.
- If authenticity confirmations due to specific restrictions related to COVID-19 measures can not be taken within the adjusted deadlines, this must be documented in individual cases. The authentification in these cases has to be done as soon as possible.
Source: https://www.finma.ch/en/news/2020/05/20200519-news-aufsichtsmitteilung-062020/
Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.
Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.