In short: owning and acquiring banks in Switzerland
Ownership Restrictions and Effects
dominating interest
Describe the legal and regulatory restrictions on the types of companies and individuals that can own a controlling interest in a bank (or non-bank). What is “control” for this purpose?
A qualifying holding within the meaning of the Federal Act on Banks and Savings Banks (Banking Act) is a holding of 10 percent or more of the capital or voting rights of the bank or the holder of the holding is otherwise able to significantly influence the business activities of the bank. In addition, the Swiss Financial Market Supervisory Authority (FINMA) typically requires the disclosure of shareholdings of 5 percent or more in order to assess whether the requirements for a banking license are consistently met or not.
The Banking Act does not impose any restrictions on the type of company or person who holds a controlling interest in a bank. However, one of the general requirements for obtaining a license to operate a bank is that any person or entity holding, directly or indirectly, a qualifying interest in a bank must ensure that their influence does not interfere with the diligent and reliable conduct of business of the bank. Therefore, the bank’s shareholders and their activities may be relevant to obtaining and maintaining a banking license.
Examples of circumstances in which shareholders with a qualifying holding can have a negative impact on the bank are a lack of transparency, unclear organization or financial difficulties of financial conglomerates or the influence of a criminal organization on the shareholder. If FINMA is of the opinion that the requirements for the banking license are no longer met because of a qualified shareholder, it can suspend the voting rights in connection with such a qualified participation or, if necessary, as a last resort, revoke the license, which would trigger liquidation proceedings .
foreign property
Are there any restrictions on foreign ownership of banks (or non-banks)?
If foreign nationals with qualifying holdings directly or indirectly hold more than half of the voting rights or otherwise control a bank under Swiss law, the granting of the banking license is subject to additional requirements. In particular, the corporate name of a foreign-controlled Swiss bank must not indicate or suggest that the bank is controlled by Swiss persons, and the jurisdictions in which the owners of the qualifying holding are incorporated or resident must allow “reciprocity”, i.e :
- Swiss residents and Swiss resident companies must be able to operate a bank in the relevant country; and
- such banks operated by Swiss residents are not subject to any more restrictive regulations compared to foreign banks in Switzerland.
The reciprocity requirement is subject to any conflicting obligations in government treaties and is therefore not applicable to World Trade Organization member states. In addition, FINMA can require the bank to be subject to appropriate consolidated supervision by a foreign supervisory authority if the bank is part of a group active in the financial sector.
If a bank under Swiss law is foreign-controlled as described above, or if the foreign owners of a direct or indirect qualifying participation in the Swiss bank change in a foreign-controlled bank, a new special license for foreign-controlled banks must be obtained prior to such an event. A foreigner within the meaning of the Banking Act is:
- a natural person who is not a Swiss citizen and does not have a Swiss residence permit; or
- a legal person or partnership that has its registered office outside Switzerland or, if its registered office is in Switzerland, is controlled by natural persons as defined above.
Impact and Responsibilities
What are the legal and regulatory implications for companies that control banks?
There are no restrictions on the business activities of the qualifying holdings in a bank, provided that the requirements for granting and maintaining the license are met. In principle, transactions between the (controlling) shareholders of a bank and the bank itself may be subject to special requirements (e.g. lending to significant shareholders must be based on generally accepted banking principles).
What are the legal and regulatory duties and responsibilities of an entity or individual controlling a bank?
Every controlling shareholder is obliged to report the acquisition or sale of a qualifying holding and if certain thresholds are reached, exceeded or fallen below. Furthermore, the holder of a qualifying holding must not adversely affect the prudent and reliable operations of the bank, as this may result in the loss of the bank’s concession.
If there are justified concerns that a bank is overindebted, no longer complies with capital adequacy requirements or is having serious liquidity problems, FINMA can order certain protective measures and the creation of a recapitalization plan. The rights of creditors and shareholders may be adversely affected as part of a recapitalization plan.
What are the effects of a bank’s insolvency on a dominant company or individual?
There is no particular repercussion for a controlling shareholder of a bank if the bank becomes insolvent. However, if a bank becomes insolvent, FINMA has far-reaching powers of intervention and can take protective or restructuring measures to protect the bank’s creditors. Such actions may have an indirect impact on shareholders.
changes in control
Required Permits
Describe the regulatory approvals required to gain control of a bank (or non-bank). How is “control” defined for this purpose?
The acquisition of a qualifying holding in a bank by a Swiss natural or legal person triggers a reporting obligation to the Swiss Financial Market Supervisory Authority (FINMA). All natural and legal persons must report to FINMA before directly or indirectly buying or selling a qualifying holding in a bank. FINMA examines whether the influence of the new shareholder with qualified participation would be detrimental to the prudent and reliable business activities of the bank and intervenes if necessary.
Foreign-controlled banks must apply for an additional license from FINMA if the foreign owners of qualifying holdings change.
Foreign Acquirers
Are the supervisory authorities open to foreign acquirers? How does the regulatory process differ for a foreign acquirer?
The bank must apply for an additional license from FINMA if foreigners directly or indirectly hold more than half of the votes or otherwise have a dominant influence on the bank. If the transition to foreign control results in the bank becoming part of a financial group, FINMA requires that the foreign supervisor agrees and is able to ensure consolidated supervision of the group as a whole (including the Swiss institution).
Under what circumstances can a foreign bank (or non-bank) establish a branch and conduct business? For example, can it set up a branch, or does it need to set up or acquire a locally licensed bank?
A foreign bank must be approved by FINMA as a branch office if it employs people in Switzerland who conduct business for it in or from Switzerland on a permanent basis or hold customer accounts that create legal obligations. Likewise, a foreign bank must obtain a permit from the Swiss supervisory authority if it employs people who carry out activities permanently and professionally in or from Switzerland that do not suffice to specify a branch, such as representative activities (e.g. advertising ).
The licensing requirements for a branch and a representative office (to a lesser extent) are similar to those of a domestic Swiss bank, with the exception of the capital requirements (although FINMA may require financial guarantees for a branch). It is also necessary that the foreign bank is subject to appropriate supervision, which also includes the Swiss branch or representative office. Furthermore, with respect to Swiss branches, where the foreign banks are part of a group active in the financial sector, adequate consolidated supervision of the group by foreign supervisors is required.
Alternatively, a foreign bank may choose to acquire a locally licensed bank. This also requires an additional license.
Factors taken into account by the authorities
What factors are considered by the relevant regulators when acquiring control of a bank (or non-bank)?
FINMA generally checks whether the requirements for the bank license are still met and, in particular, whether the new shareholders with a qualifying holding are not having a negative impact on the prudent and reliable business activities of the bank.
Submission Requirements
Describe the filings required to acquire control of a bank.
Every natural or legal person must inform FINMA before acquiring or selling a direct or indirect qualifying holding in a bank organized under Swiss law. This obligation to notify also applies if a qualified shareholder increases or decreases his qualified holding and reaches, falls below or exceeds 10, 20, 33 or 50 percent of the capital or the voting rights of the bank. The notification must contain a statement as to whether the interest is held for own account and whether options or similar rights to the interest have been granted.
The bank itself must also notify FINMA of changes that trigger the reporting obligation for shareholders once they become aware of them, but at least once a year.
In the case of a foreign-controlled bank, the bank must apply for a special license from FINMA before any change of foreign owner of a qualifying holding. In its application, the bank must present all the facts that FINMA can use to assess whether the requirements for the special permit are met.
Time Frame for Approval
What is the typical timeframe for regulatory approval for both a domestic and foreign acquirer?
In general, the timing of FINMA approvals or opinions depends heavily on your workload. The process for a special banking license at a foreign-controlled bank can take three months. However, if the foreigner’s country of residence or residence is not a member state of the World Trade Organization, the process may take significantly longer. FINMA will have to examine whether this country grants reciprocity rights.
If the acquirer is not a foreigner, no formal authorization or approval is required and a FINMA opinion is therefore usually available within a shorter period of time.
Legal date
Right on
Provide the date when the above information is correct.
January 1, 2022.