Belser Altorfer & Partner Zurich
The increasingly global activities of banks and financial intermediaries, together with the increasingly complex transactions in which they are engaged, have resulted in a need for effective cross-border supervision. For this purpose, in June 1996, the Basle Committee on Bank Supervision drew up the so-called Stockholm Recommendations. Corresponding amendments to the Swiss Banking Law and Swiss Stock Exchange Law, respectively, to enact these recommendations in Switzerland will enter into force on October 1, 1999.
These amendments will permit foreign supervisors to conduct direct on-site inspections of the Swiss branches of foreign banks, foreign financial intermediaries and foreign stock exchanges. The consent of the Swiss Federal Banking Commission (FBC) is necessary for this purpose, which will only be granted under certain conditions:
- the supervisor must be the home country supervisor of the establishment subject to inspection;
- must be responsible in such country for consolidated supervision of the relevant establishment; and
- must be subject to official or professional secrecy.
The foreign supervisor may use the information which is thereby obtained exclusively for purposes of consolidated supervision (speciality reservation) and may not forward the information to other governmental authorities without the consent of the FBC. In case of doubt as to the entitlement of a foreign supervisor to conduct on-site inspections, the FBC will decide the issue by means of an order which is subject to appeal.
The on-site inspections are limited to information that is necessary for purposes of consolidated supervision, such as: an appropriate organization, appropriate risk management, compliance with equity and risk distribution requirements and assurance of the proper conduct of business by the relevant establishments. Access to customer-specific information is precluded when such information is related within the broadest sense of the term to asset management or deposit transactions. If the foreign supervisor nonetheless needs such information (eg, risk concentrations), the FBC collects the information itself and issues an order, subject to appeal, prior to its transmittal of the same. In all other cases, in particular in connection with commercial loan customers, the foreign supervisor will be permitted to directly view the customer information.
The respective amendments of the relevant Swiss laws succeed at balancing the interests of customers against the need for effective cross-border supervision, and no significant weakening of the Swiss banking secrecy will result from the on-site examinations.