Is Switzerland Fintech haven made on earth? In this memo we will explain what the Swiss Fintech Sandbox, and how it is possible to test a fintech based financial business without having to apply for any authorization (such as for example bank license) or without being supervised (under SRO/Finma). Do not hesitate to contact us at [email protected] for more information on this matter.
The Swiss Government and Parliament have a policy to prioritize Fintech Economy and to create a neutral legal framework that facilitates said investments in Switzerland.
To achieve this Switzerland has decided for a “forward looking” generic regime with no attempt to categorise fintech business models. New fintech business models appears every day and regulates business models would impede Switzerland objective to become the new fintech hub.
SWITZERLAND THREEFOLD FINTECH STRATEGY:
Swiss Government strategy is as follows:
- Creation of a license exempted innovation area
- Targeted regulatory adjustments that facilitates the operation of fintech based business models
- A new “Financial Innovators Service License” (also called light banking license)
SWISS FINTECH SANDBOX LEGAL BASIS
Legal Blockage: One of the legal issue that so far hindered the development of Sandbox Fintech businesses in Switzerland was that to test and develop financial fintech business models often requires the fintech start up to receive and hold client’s deposits.
Now has a principle Swiss Bank Act provides that only licensed bank can receive and hold deposits from the public.
Solution: The Swiss Parliament’s has modified the disposition Swiss Ordinance on Banks and Saving Banks (“B0”) and added a New Articles 6 paragraph 2.
Pursuant to article 6 paragraph 2 of the BO:
“Anyone who, over a long period of time, accepts more than 20 deposits from the public or makes call (offering) to the public to obtain them does not act in a professional capacity within the meaning of the Banking Act if they:
- a) accepts deposits from the public for a total amount of no more than 1 million francs; AND
- b) do not invest or remunerate such deposits, AND
- c) informs the depositors, in writing or by any other means allowing to establish the proof of it by a text, before these make the deposit:
1.that it is not supervised by FINMA, and
2.the deposit is not covered by the deposit guarantee.”
SWISS SANDBOX LICENSE EXEMPTED ENVIRONMENT
The Sandbox regimes creates an innovation environment allowing providers of fintech financial services to test their business models
- without being subject to licensing because of public deposit
- taking up to an aggregate deposit amount of CHF1 million irrespective of the number of public deposits
Provided that the deposits are not invested, and no interest is being paid.
WHAT LEGAL FORM MAY A SANDBOX TAKES
A sandbox could take the form of either a GMBH or a AG
- A GMBH requires only a 20,000 CHF capital that need to be fully subscribed
- An AG would require 100,000 CHF capital of which 50,000 CHF must be subscribed
To know more about the difference between AG and GMBH please ask our “Memo Comparing AG and GMBH”
WHAT HAPPENS WHEN THE SANDBOX REACH AN AGREGGATE AMOUNT OF DEPOSIT OVER 1,000,000 CHF?
If the Sandbox aggregated deposit amount pass the threshold of 1,000,000 CHF, then
- the company needs to the latest within 10 days of such amount being reached informed FINMA; AND
- Start the process for application to become properly authorized or supervised.
There are currently 2 regulatory frameworks and there will soon be a third one. Depending of the business model the options are and will be:
- Application to be supervised under SRO/FINMA for business model such as for example crowdfunding, OR
- Application for a bank license for business models that requires to receive deposit from the public; OR Hopefully before the end of 2018
- Application for the so called “light bank license” or “Financial Innovators Service License” that would allow Financial services providers to accept up to CHF 100 million in deposits providing that they hold 5% of the deposits and at least CHF 300,000 capital as collateral.
We hope that this post has been useful to you and permit you to have a better understanding of the Swiss legal framework in relation to the creation of a Fintech Financial Sandbox Exempted regulatory regime
If you have any remarks to help us improve this note do not hesitate to contact us with your remarks and even your critics. Anything that can help us to provide a better understanding or service to our clients and readers are welcome.
While this note deal with legal issues it is given to you on a courtesy informative basis and you should still require our assistance or others assistance when starting your business in Switzerland.
Do not hesitate to contact me if you have questions related to this matter at [email protected]