For clear regulatory responsibilities
The Federal Council opened the consultation on a new ordinance on the Financial Market Supervision Act on 1 May 2019. The SBA welcomes the draft ordinance, through which the Federal Department of Finance (FDF) has addressed the impetus triggered by the Landolt motion and other political initiatives. The new ordinance will flesh out the Financial Market Supervision Act (FINMASA). FINMA’s role and competencies with regards to regulation and international standard-setting are to be defined more specifically and the division of responsibilities and collaboration with the FDF are to be set out more transparently.
Independence of FINMA undisputed
FINMA’s independence in the area of financial market supervision in not impacted by the ordinance on the Financial Market Supervision Act (FINMASA). This quickly becomes clear when one considers which FINMASA articles have been fleshed out in the draft ordinance. There are no provisions in the ordinance for either the article relating to its organisation or the articles governing FINMA's supervisory functions. On closer inspection, the fears expressed by some that FINMA's supervisory functions will be restricted are therefore no longer founded.
The ordinance instead focuses much more on the improved governance of FINMA. FINMA’s regulatory activities and its representation of Switzerland in international bodies are to be set on sounder footing under the rule of law. It can therefore be said that FINMA is being strengthened, as the proposed provisions in the ordinance increase the democratic legitimacy of the FINMA regulation and therefore improve acceptance of FINMA’s regulatory activities overall.
The ordinance focuses on the following aspects:
- FINMA’s competencies with regards to international tasks and in regulation are specified more clearly and the ordinance sets out how these competencies relate to those of the Federal Council and the FDF.
- The regulatory principles are more clearly specified. The aim here is to establish meaningful principles for the entire lifespan of a regulation. For example, the ordinance sets forth that the principles of legality and proportionality apply unconditionally, also in the case of regulation. This is already the case as a result of the hierarchy of norms, but as experience has shown, these key questions have repeatedly given rise to discussions. The involvement of the impacted parties, the public and the relevant authorities is also set out more clearly.
- Further to this, the ordinance sets forth the main features of the collaboration between FINMA and the FDF as well as their mutual exchange of information.
The banking sector’s concerns
Following a detailed examination of the proposals, the SBA has identified a number of important improvements. Its main concerns are as follows:
- Separation of supervision and regulation: Supervision and regulation should be more mutually independent, which could be achieved through a separation within the authority.
- Duty to give reasons and duty to document: In the interests of greater transparency, we welcome the fact that in the case of new regulations or regulations that are to be changed, FINMA is subject to a duty to give reasons and a duty to document as well as a duty to explain the legal basis and the legality and proportionality. To ensure the system is complete, after conducting a consultation, FINMA should draft a results report which documents and substantiates FINMA's deliberations and decisions on the positions put forward during the consultation.
- Differentiated regulation: Regulation must be differentiated according to the criteria “size”, “complexity”, “structure”, “business model” and “risk”, which should also be stated in the ordinance text. As a consequence of the principle of proportionality, parameters for differentiation should also be set, below which exemptions from regulatory provisions should be permitted (de minimis exceptions).
- International standards: International standards should serve as the benchmark for FINMA’s regulatory activities. Switzerland should, on the one hand, take advantage of its discretionary powers with regards to the implementation of such standards and on the other hand, avoid an excessive “Swiss finish”.
- Self-regulation: The proposed execution of a public consultation process in order for self-regulation to be recognised as a minimum standard reverses all of the advantages of self-regulation, which is why Art. 12 para. 1 FINMASAO should be completely eliminated. In addition, it should inherently be at the discretion of the respective industry organisation to decide at any time whether to withdraw the self-regulation it has created.