Circular 2008/3 Public deposits at non-banks. Commercial acceptance of public deposits by non-banks under the Banking Act

Transcription

1 Circular 2008/3 Public deposits at non-banks Commercial acceptance of public deposits by non-banks under the Banking Act

2 Circular 2008/3 Public deposits at non-banks Commercial acceptance of public deposits by non-banks under the Banking Act

3 Circular 2008/3 Public deposits at non-banks Commercial acceptance of public deposits by non-banks under the Banking Act Reference: FINMA-RS 08/3 Public deposits at non-banks Issued: 20 November 2008 Entry into force: 1 January 2009 Last amendment: Concordance: Legal bases: 18 January 2010 [amendments are denoted with an * and are listed at the end of the document] previously SFBC circ. 96/4 "Public deposits at non-banks" dated 22 August 1996 FINMASA Article 7(1)(b) BA Article 1 BO Articles 1-7 Addressees BA ISA SESTA CISA AMLA Others Banks Financial groups and congl. Other intermediaries Insurers Ins. groups and congl. Insurance intermediaries Stock Exchanges and participants Securities dealers Fund management companies SICAVs Limited partnerships for CISs SICAFs Custodian banks Asset managers for CISs Distributors Representatives of foreign CISs Other intermediaries SROs DSFIs SRO Supervised Audit firms Rating Agencies X Circular 2008/3 Public deposits at non-banks 2

4 Table of Content I. Amendments to the Act and Ordinance Dating Back to 1994 margin nos. 1 5 II. Penal provisions margin no. 6 III. Criteria for the Assessment of Deposits margin nos A. Are deposits from the public accepted on a professional basis? margin nos. 8 9 B. Do the liabilities have the attributes of deposits? margin nos C. Are the deposits from the public? margin nos IV. Exemptions from the prohibition of accepting public deposits on a professional basis margin nos Circular 2008/3 Public deposits at non-banks 3

5 I. Amendments to the Act and Ordinance Dating Back to 1994 The scope of application of the Act as defined in Article 1(2) BA was redefined with the amendment of the Swiss Federal Act on Banks and Savings Banks (hereinafter referred to as the Banking Act or BA; SR 952.0) of 18 March This amendment to the Act was further substantiated by Articles 5-7 of the Ordinance on Banks and Savings Banks of 30 April 2014 (Banking Ordinance or BO, SR ). 1 The acceptance on a professional basis of deposits from the public shall (with a few exceptions) only be allowed to banks which are supervised by FINMA in accordance with the Banking Act. 2 Individuals or legal persons without a banking license who intend to accept deposits from the public on a professional basis shall obtain a banking license before commencing their activities. 3 Repealed Repealed 4 5 II. Penal provisions Article 46(1)(a) and (2) BA, respectively, make the unauthorized acceptance of deposits or savings deposits a punishable act. Similarly, the use of the terms bank, banker or savings by non-banks is prohibited (Article 49(1)(a) and (2) BA, respectively). Finally, the communication of false information to the FINMA shall be punishable (Article 45(1) and (2) of the Financial Market Supervision Act [FINMASA; SR 956.1]). 6 III. Criteria for the Assessment of Deposits Existing deposits must be returned if all of the three following questions (Paragraphs A through C) are in the affirmative: 7 A. Are deposits from the public accepted on a professional basis? In accordance with the definition set out in Article 6 BO, those who continuously accept more than 20 deposits from the public or advertise themselves as accepting deposits from the public, even if this results in fewer than 20 deposits are deemed to be acting in a professional capacity as per the Banking Act. 8 Therefore, as per statutory presumption, anyone who accepts deposits from more than 20 depositors or recommends their services to that effect shall always be considered to be acting in a professional capacity, even if fewer than 20 deposits result. Furthermore, public advertisement of the acceptance of deposits from the public (e.g. by distribution of brochures or advertisements) shall be prohibited (cf. Article 7 BO; Article 49(1)(c) or (2) BA, respectively). 9 Circular 2008/3 Public deposits at non-banks 4

6 B. Do the liabilities have the attributes of deposits? The Banking Ordinance assumes in principle that all liabilities have the character of a deposit. Article 5(3)(a)-(f) BO conclusively lists the exceptions: 10 a) Third-party funds without the characteristics of a loan or a deposit Funds that constitute a consideration from a contract for the transfer of ownership or for the rendering of a service or which are transferred as a security (Article 5(3)(a) BO). 11 For example, down payments in respect of a purchase contract, advance payments for an order, rental deposits, etc., therefore, do not possess the character of a deposit. 12 b) Bonds Bonds and other debt instruments that are standardized and issued en masse or non-certificated rights with a similar function (value rights) if the creditors are informed of this in the scope stated in Article 1156 Code of Obligations (CO) (Article 5(3)(b) BO). 13 In contrast to an interest-bearing deposit made individually, such investment instruments represent standardized bonds which Article 1(2) BA expressly exempts, provided the minimum information prescribed by the Code of Obligations is available. Individually issued cash certificates are not deemed to be bonds. 14 c) Settlement accounts Credit balances on client accounts of securities dealers, precious metal traders, asset managers or any similar companies which solely serve the purpose of the settlement of client transactions, provided no interest is paid on them (Art. 5(3)(c) BO). 15 Such accounts are for the sole purpose of maintaining the necessary liquid funds to settle the bank s main business. The rapid turnover and limitation of the volume of such funds shall be ensured by the credit interest ban applicable to such funds. 16 Credit balances on client accounts of precious metal traders fall under the exception if a precious metal trader is in physical possession of the precious metal credit of its client and such client is entitled to preferential claim in the case of the precious metal trader s bankruptcy. 16 bis With Article 5(3)(c) BO, foreign exchange traders who maintain accounts for investments in various currencies for their clients no longer fall under this exception as from 1 April ter d) Funds for life insurance and occupational pension funds Funds, the acceptance of which is inseparably linked to life insurance contracts, occupational pension funds or other benefit plans pursuant to Article 82 of the Federal Act of 25 June 1982 on Occupational Old-age, Survivors and Invalidity Insurance (Article 5(3)(d) BO). 17 Circular 2008/3 Public deposits at non-banks 5

7 The deposits stated in (d) are authorized on the basis of other federal acts; moreover, they are made by supervised institutions. 18 e) Payment means and payment systems Funds which feed into a means of payment or a payment system (payment cards, possibilities to pay per internet or mobile phone, etc.) are not considered to be deposits, provided that 18 bis they are only used to acquire goods and services, the maximum credit balance per customer per issuer of a payment instrument or provider of a payment system does not exceed CHF 3,000 and no interest is paid on them. Discounts or other pecuniary advantages shall be allowed only on the goods and services themselves and may not relate to the amount of the credit balance (Article 5(3)(e) BO). C. Are the deposits from the public? Again, the Banking Ordinance assumes that all deposits are from the public. Exceptions to this principle are listed in Article 5(2)(a)-(f) BO. 19 Not deemed to be public deposits are only those from: a) Banks Domestic and foreign banks or enterprises under state oversight (Article 5(2)(a) BO). As foreign banks are deemed enterprises that are authorized to accept deposits in accordance with the law of the state under which they are organized. Examples of other enterprises under state supervision are insurance companies b) Related parties Shareholders or partners holding qualifying equity interests in the relevant debtor (Article 5(2)(b) BO) and persons who are connected to those in (b) by either economic or family ties (Article 5(2)(c) BO). 22 Qualified shareholders i.e. those with more than 10% of the voting rights or capital (Article 3(2)(cbis) BA) and persons economically affiliated (e.g. parent, subsidiary and sister companies) shall be deemed particularly close and must not be treated like the remaining public. In contrast to the public, they regularly receive information in advance of other parties and can exercise their influence earlier. 23 c) Institutional investors Institutional investors with professional treasury departments (Article 5(2)(d) BO). 24 Circular 2008/3 Public deposits at non-banks 6

8 Depending on the specific circumstances, for instance, pension funds, municipalities, industrial and trading enterprises can fall in this category of investors who are not deemed to equate the public. A professional treasury operations shall presuppose at least one person with experience in the financial field with designated specialized knowledge whose principal activity is the treasury operations of the enterprise on an on-going basis. 25 d) Associations, foundations and cooperatives Associations, foundations or cooperatives, provided these are not active in the financial sector, were created for the sustenance of an idealistic cause or promote mutual assistance, and which strictly use the deposits garnered for this cause, and for which the terms of the deposits last at least six months (Article 5(2)(f) BO). 26* Associations and foundations may in particular be associations for sports, nature conservation or cultural heritage conservation, foundations with a religious nature or for promoting home ownership or for cultural purposes. Among others, cooperatives may be production, distribution, sales, housing or also agricultural cooperatives. The group of depositors shall not be limited to members. However, deposits are regarded as deposits from the public if made to an association, foundation or cooperative where the principal purpose or activity consists of accepting deposits and investing these on an interest-bearing basis. 27 Article 5(2)(f) BO emphasizes the connection of the accepted funds with an ideational purpose or mutual assistance. In order to clearly differentiate itself from banking activities, a minimum period of investment of six months is now mandatory. 27 bis e) Employees Active or retired employees, when the funds are deposited with their employer (Article 5(2)(e) BO). The permitted circle of investors is restricted to those actually employed by the company in question (including retirees with respect to their final employer) who make a deposit directly with their employer However, (e) does not permit any deposits by a wider circle of persons (such as family members, i.e. spouse and children) with the respective family member s employer. It is also not permitted to make such deposits with a legal entity other than the employer (e.g. with a grouping of employees of the same employer established as an association, cooperative or foundation) unless the employer is liable for the deposits (see margin no. 33 below). 30 Circular 2008/3 Public deposits at non-banks 7

9 IV. Exemptions from the prohibition of accepting public deposits in a professional capacity In addition to banks, the following institutions may accept deposits from the public in accordance with Article 3 BO: 31 corporations and institutions governed by public law as well as cash offices for which they are fully liable. Despite not being supervised by the FINMA, such institutions shall be exempted because they are perceived to be at least equivalent with regard to solidity; moreover, the government is liable for such institutions commitments. 32 In addition, the cash offices of enterprises to receive deposits which are legally independent of the employer are also permitted if the mutual employer of the depositors guarantees the repayment of the investments plus agreed-upon interest. 33 The acceptance of deposits is also permitted if a bank subject to the Banking Act guarantees the repayment of the deposits and the agreed-upon interest (default guarantee) (Article 5(3)(f) BO). 34 Repealed Repealed Repealed Circular 2008/3 Public deposits at non-banks 8

10 List of amendments The circular has been amended as follows: These amendments were passed on 18 January 2010 and enter into force immediately. Amended margin nos. 26, 27 bis The references to the BO have been adapted to the Banking Ordinance dated 30 April Circular 2008/3 Public deposits at non-banks 9

11 Contacts Philipp Rickert Partner, Head of Financial Services, Member of the Executive Committee Tel Cataldo Castagna Partner, Financial Services Tel Michael Schneebeli Partner, Financial Services Tel Patrizio Aggio Director, Financial Services Lugano Tel Olivier Gauderon Partner, Financial Services Geneva Tel Markus Schunk Partner, Head Investment Management Tel Jürg Birri Partner, Leiter Regulatory Competence Center Tel Mirko Liberto Partner, Financial Services Tel mirkoliberto@kpmg.com Manfred Suppan Partner, Financial Services Tel msuppan@kpmg.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received, or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. The scope of any potential collaboration with audit clients is defined by regulatory requirements governing auditor independence KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss legal entity. All rights reserved. Circular 2008/3 Public deposits at non-banks 10