While Switzerland’s financial institutes belong to the leading financial services providers in the world, they have been facing significant international competition in the last few years. At the request of the Swiss government, the Federal Department of Finance (FDF) evaluated, in 2016, the impact of the existing regulatory framework on the FinTech services. According to the FDF, the Federal Banking Act, the related Ordinances as well as the Federal Anti-Money Laundering Act contain several barriers to market entry for FinTech companies, in particular due to the prudential banking licence requirement.

Based on this appraisal and a number of suggestions on the part of FINMA, the Federal Council introduced, on 5 July 2017, two changes in the Federal Banking Ordinance (BankO). The newly adopted rules are expected to simplify crowdfunding and payment processing services and other business models that comprise the acceptance of funds from the public.

First, under the Swiss banking regulation, persons accepting deposits from the public on a commercial basis need a banking licence, except for non-interest bearing accounts for the purpose of settlement of client transactions (article 5 (3)(c) BankO). However, since FINMA applied a maximum holding period of 7 days for such third-party monies not to qualify as “deposits from the public”, this exemption was of limited usefulness for FinTech companies.

The new rules codify the maximum holding period on settlement accounts, while extending it to 60 days (article 5 (3)(c) revBankO). This allows, for instance, crowdfunding platforms to have longer campaigns and payment service providers to process payments in batches.

It is important to note that the requirement that the settlement accounts be non-interest bearing remains unchanged. What is more, the exemption does not concern settlement accounts of securities dealers. Finally, because of investor protection considerations, the Swiss government rejected a proposal raised in the consultation process for a 90-day maximum holding period. Nonetheless, the explanatory report notes that, taking into account the effects of the revised regulation, the government may further extend the maximum holding period in the future.

Second, under the Swiss banking regulation, a person is considered to accept deposits from the public on a commercial basis and thus requires a banking licence if it accepts deposits from more than 20 persons on an ongoing basis, regardless of the individual or total amounts, or publicly solicit deposits (art. 6 (2) BankO). The new rules change the definition of “acting on a commercial basis”, allowing firms to accept deposits from the public in an amount of up to CHF 1 million, irrespective of the number of depositors, without requiring a banking licence (art. 6 (2) revBankO). The exemption applies only if the deposits are neither invested, with the exception of financing a mainly commercial or industrial activity (e.g. by taking deposits through crowdlending to finance a commercial business), nor interest-bearing. Moreover, the depositors need to be informed in advance that (i) the institution is not supervised by FINMA and (ii) the deposits are not covered by the Swiss depositor protection regime. This exemption, which applies in addition to the exemption for settlement accounts, creates a regulatory “sandbox”. In other words, it allows early-stage businesses to experiment without being subject to the noteworthy burden of prudential supervision. If the business exceeds the threshold of CHF 1 million, it must inform FINMA within 10 days and apply for a banking licence within 30 days. In certain cases, FINMA can prohibit the further acceptance of deposits until a licence is granted.

On 6 July 2017, FINMA published a guidance note regarding the new rules on public deposits (FINMA Guidance 03/2017). According to the document, FINMA expects the revised BankO to require amendments on its Circular 2008/3 “Public deposits with nonbanks”, which details the current regulatory practice in the area of deposits. It will initiate a public consultation procedure on proposed changes in autumn 2017. In its guidance note, FINMA also asks interested parties to participate in a survey on the planned FinTech licence, which is the third pillar of the new FinTech rules.

The enactment of the first two pillars of the new FinTech regulation is an important measure in view of improving the regulatory environment for innovative FinTech services.  However, the new rules do not affect existing anti-money laundering regulations. Put differently, FinTech companies acting as financial intermediaries remain, in principle, subject to the Swiss anti-money laundering legislation. Moreover, several other areas still need to be addressed. These include, for instance, the rules on consumer credit, which affect the business of crowdlending platforms and other FinTech businesses in Switzerland. Currently the Economic Affairs and Taxation Committee of the National Council is discussing proposed amendments to the Federal Consumer Credit Act in the FinTech Bill. An area that has so far been excluded from the FinTech regulation project pertains to cryptocurrencies and other blockchain-enabled business models.