With FIDLEG expected to come into force on 1 January 2020, financial services providers in Switzerland will need to comply with a new set of investor protection requirements.
Late provision of clarity by regulators about many MiFID II requirements led to cumbersome manual workarounds in many cases. Financial institutions focused on ensuring compliance by the regulatory deadline at the expense of process efficiencies and better customer experience. The challenges created by those workarounds had to be addressed throughout 2018 in numerous Day 2 projects. Taking this experience into account, and looking ahead to the timeline for FIDLEG, preparation for a compliant and timely FIDLEG implementation needs to start now, addressing key design decisions, based on the recent MiFID II implementation and the strategic objectives of the organisation. This will determine the scope of the project, set the timeline to achieve compliance by January 2020, and considerably limit the necessity for post go-live enhancements.
This fourth blog post in our FIDLEG series considers an illustrative roadmap for effective FIDLEG implementation. It outlines why financial institutions should start addressing FIDLEG now to ensure a smooth journey to compliance.
When starting and operating a fintech, local regulations are a critical aspect to consider. It is often believed that regulation is a limiting factor for fintechs and hindering innovation. Does this hold true for the recently introduced EU fintech action plan? Do fintechs face similar regulations and challenges in Switzerland? We believe that the current regulatory efforts in the financial service space are stimulating innovation rather than hindering the development of disruptive offerings. That is one of the reasons, why financial institutions in Switzerland not only need to pay close attention to the local regulatory landscape, but also to the EU-wide efforts in this area.
FIDLEG (engl. FinSA) sets out cross-sector rules for offering financial services and distributing financial instruments. The rules are aligned with the EU directives (MiFID II, Prospectus Directive, PRIIPs). However, FIDLEG includes important adjustments made to reflect the specific Swiss circumstances. Institutions that did not implement MiFID II will have to battle with new requirements facing their clients based in and served our of Switzerland. For all the others, there are good opportunities to leverage work already done or take advantage of some of the differences. However, it all takes time.
On 5 July 2018, the U.S. Treasury Inspector General for Tax Administration (“TIGTA”) released a final report which found that, despite spending nearly $380 million, the U.S. Internal Revenue Service (“IRS”) has taken limited or no action on a majority of planned activities to enforce compliance with the Foreign Account Tax Compliance Act (“FATCA”). While the report does address findings and recommendations regarding U.S. taxpayer compliance, it includes a number of findings and recommendations relevant for foreign financial institutions (“FFI”), of which FFIs need to be mindful when considering potential future IRS enforcement focus areas.
Among the locations considered in Deloitte’s International Wealth Management Centre Ranking 2018, Switzerland is the leading offshore wealth management centre with regards to both revenue and profit margins. Over the past years, Switzerland overtook Luxembourg as the most productive wealth management centre and substantially improved its own profit margin. Overall, private banks pushed for an optimisation of their traditional business models through strategic cost reduction and through improvments of their product and service penetration. However, innovating their business models will be pivotal for private banks to sustain these achievements.
Banks are now offering an ever-growing number of digital functionalities1 targeted at delivering a superior client experience, exploring so-called “new” technologies to serve clients and providing more integrated and seamless services.
However, the true yardstick for differentiation in an emerging banking ecosystem will be not the number of digitised services or banking apps but the value added or enhanced experience for clients. This leads to questions about how banking services should be digitised, what they should consist of in the short- and long-term, and more importantly, what capabilities and technologies banks should focus on to maintain their leading roles in emerging banking ecosystems in the future.
In May-June 2018, the European Central Bank (ECB) and the Basel Committee on Banking Supervision (BCBS) published reports on the progress of the largest, internationally active banks towards compliance with the BCBS Principles for Effective Risk Data Aggregation and Reporting – known as BCBS 239.
Whilst the reports approach the topic from different angles, the similarities in their findings are striking and paint a scenario where, two years after the original compliance deadline for global systemically important banks (G-SIBs), gaps are still significant and widespread.
With the adoption of FIDLEG, Swiss financial institutions will need to amend their advisory processes to comply with these new rule sets. This third blog post of our FIDLEG series explores 8 key design decisions financial institutions should consider when implementing FIDLEG. In particular, it showcases the impact of the new rules on the onboarding as well as offering and sales stages of the advisory value chain. By taking relevant design decisions early, financial services providers can significantly reduce the burden and increase the speed of implementation.
Banks everywhere in Europe focus on “digital” which has led to significant advances in this space. As a top priority, banks are further extending functionalities of online banking, working to achieve the best user experience (UX) to further develop the mobile banking channel. They are exploring innovation topics such as blockchain technology or open and beyond banking. All of these fast-paced developments across such a broad range of topics make it challenging to compare banks’ digital capabilities.
In what functionalities have leading players invested? How have they developed their channels to facilitate client interaction in the digital age? Which bank offers the best UX in EMEA?
On 25 June 2018, an amendment to Directive 2011/16/EU, commonly referred to as “DAC6”, came into force, which may have significant impact on Swiss entities. DAC6 requires the disclosure of certain cross-border tax planning arrangements by way of a reporting to the local tax authorities. While the rules do not apply in Switzerland directly, Swiss intermediaries may nevertheless be affected if they have operations or otherwise provide services in any EU country. Even purely Swiss intermediaries that serve EU clients should carefully consider the impact of DAC6.