10 Cybersecurity – a challenge for the market and the FMA
THEMATIC PAGES
38 Fintech – more than just new business models
46 European cryptomarket regulation
54 Cooperation within the European System of Financial Supervision
64 In Ireland for the FMA
70 From internship to Executive Board
76 New, more collaborative ways of working
4 SPOTLIGHT
6 FOREWORD
PROGRESS REPORT
12 SUPERVISION AND RESOLUTION
13 Impact of rising interest rates on the real and financial economy
15 Trends and risks
16 Quality assurance for auditors
17 Macroprudential supervision
18 Licences, approvals, registrations
20 Ongoing supervision
28 Ad hoc supervision of TT service providers
28 Due diligence supervision to combat money laundering
32 International administrative assistance
33 Enforcement
40 Activities of the resolution authority
41 Outlook
42 REGULATION
43 Regulatory developments continue to be dynamic
43 Redesign of the legal framework for the supervision of banks and investment firms
48 Outlook
50 EXTERNAL RELATIONS
51 Work meetings in Hong Kong and Singapore
51 Annual media conference
52 National cooperation
52 Bilateral cooperation
56 European cooperation
57 Global cooperation
57 Outlook
58 ENTERPRISE AND TEAM
59 More digital, more diverse, more sustainable
61 Development of the workforce
61 Educational background and nationalities
62 Corporate governance
62 Governance, risk & compliance
66 FMA funding
67 Changes and promotions
67 Opportunities for young talent
68 Outlook
72 New employer web presence for the FMA
72 Code of conduct for maintaining high quality
73 Digital excellence at all levels
ANNUAL REPORT AND FINANCIAL STATEMENT
81 Annual report
82 Balance sheet
83 Income statement
84 Notes on the financial statement
88 Attestation of the Audit Office
FMA Annual Report 2023
STABILITY IN TURBULENT TIMES
Last year was characterised by persistently high inflation, rising interest rates, and a weakening of the global economy. Despite this, the Liechtenstein financial centre once again proved its stability.
“A
UNIQUE OPPORTUNITY“
NEW FOUNDATIONS FOR THE BANKING CENTRE
The FMA was mandated by the Government in 2022 to completely revise the legal framework for the supervision of banks and investment firms and to align the system of domestic laws with the regulatory system of EEA law. This work is now well advanced.
The FMA offers employees the opportunity of secondments with foreign partner authorities. Alexandra Bickel is a legal specialist at the FMA and completed a secondment at the Central Bank of Ireland – “a unique opportunity,“ as she says.
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RECOGNITION …
… is what the FMA once again received for its attractive working conditions – with the Swiss Employer Award 2024. This means the FMA is one of the top employers in Switzerland and Liechtenstein. What makes us especially happy: Our employees were the jury. The FMA also made the podium in the NPO & Government category of the Digital Economy Award.
0 METRIC TONS …
is the FMA’s net CO 2 emissions target by 2035. This is set out in the FMA’s sustainability strategy. With this target, the FMA wants to make a contribution to mitigating climate change. The FMA is working closely with experts to implement and verify the target.
FROM INTERNSHIP TO EXECUTIVE BOARD
In September, the Board of Directors appointed Simone Edelmann-Boeniger as a member of the Executive Board effective 1 March 2024. Simone is not only a recognised expert, but has also worked for the FMA for many years – she joined as an intern in 2009.
Annual Report 2023
As in previous years, the situation in the financial sector during the reporting year was characterised by turbulence. After the Covid-19 pandemic, the outbreak of the Ukraine war, and the rise in energy and food prices, inflation in particular was a defining factor for the financial market. It almost seems as if crisis has become a constant. Turbulent times seem to be the new normal. What is likewise constant in this context, however, is the extremely high stability of Liechtenstein’s financial sector. Once again, the financial centre has demonstrated a high level of resilience.
To ensure that this continues to be the case, the FMA works closely together with financial intermediaries. Thanks to its in-depth analyses, the FMA provides the necessary basis for assessing risks appropriately and addressing them effectively using suitable micro- and macroprudential instruments.
Crises often also present opportunities and drive change. Key topics during the reporting year included, in particular, digitalisation, establishing new forms of work, and enshrining sustainability in our operations. At the same time, these topics offer numerous synergies and have a positive influence on each other. For example, digitalisation of the FMA is already well advanced. More and more processes can be mapped digitally from start to finish without media disruptions. This has already resulted in a significant reduction in paper consumption. Moreover, digitalisation also means that employees can now work from any location. This in turn has led to massive savings in carbon emissions thanks to reduced traffic. At the same time, digital and location-independent forms of work are also changing the demands on the FMA’s premises. The FMA has accordingly redesigned part
of its office space, offering employees a modern working environment in a pilot zone that meets the changed requirements.
In this way, the FMA is responding to a need of its employees and ensuring its long-term attractiveness as an employer. What also contributes to the FMA’s attractiveness is that it pays fair wages and does not discriminate against women or men, promotes the compatibility of family and career through part-time work, including in management positions, and offers attractive career opportunities. The best proof of this is our newest member of the Executive Board: Simone Edelmann-Boeniger started as an intern at the FMA more than ten years ago.
Developments in financial market regulation also continue to be dynamic. The FMA has been mandated by the Government to prepare an overview of possible options for redesigning the regulatory structure of the supervisory law applicable to banks and investment firms. The work is already well advanced, and the redesign of financial market law is due to be completed by 1 January 2025. New rules will also soon
apply to FinTechs. In order to continue to promote and exploit the potential of the digital transformation of the financial sector while addressing potential risks and ensuring the protection of investors and financial markets, the European Union has adopted a comprehensive package of measures – the Digital Finance Package. A key element of this package is the Markets in Crypto-Assets Regulation (MiCAR). The FMA was busy with implementation work during the reporting year.
In addition to the turbulent macroeconomic environment, supervision continues to focus in particular on combating money laundering, on climate, social and governance risks (ESG risks), and on ICT and cyber risks.
Dr. Christian Batliner Mario Gassner Chairman of the Board of Directors Chief Executive Officer
SUSTAINABILITY AT THE FMA
Sustainability plays a crucial role in the financial world as well and is one of the central issues of our time. The FMA considers sustainability in two dimensions: firstly in relation to its supervisory activities, and secondly as an enterprise itself. The role of sustainability in supervisory activities is largely determined by applicable EU regulations relating to sustainable finance. In its sustainability strategy, the FMA as an enterprise defines the four goals of “Climate neutrality by 2035“, “Avoidance of negative environmental impacts“, “Promotion of a sustainable human resources policy and management“, and “Ensuring sustainable governance structures“. These goals are based on the ESG (environmental, social, governance) criteria. The FMA sustainability strategy has been in effect since 1 January 2023.
In the first year after entering into effect, the focus was on drawing up the concrete implementation plan. The motto here is “As much as possible, as quickly as possible“. Accordingly, numerous improvements have already been introduced:
– The FMA’s operational mobility management has significantly reduced the amount of motorised private transport generated by employees. In 2022, about 40 % of motorised private transport was saved through remote work alone. This corresponds to about 750,000 car kilometres or 127 metric tons of CO 2 1 The savings for 2023 are at a similar level.
– In the reporting year, the FMA considered and approved the installation of e-charging stations in the FMA parking garage. The e-charging stations will be installed at the beginning of 2024 and will be available to both employees and visitors.
– In 2023, the introduction of a catering service in the FMA building was evaluated. An on-site catering option can help to further reduce motorised private transport. As a result of this evaluation, fresh and locally produced meals from a young Swiss company specialising in sustainable employee catering have been made available to employees since the
1 Based on average emissions of 170 grams of CO 2 per kilometre driven, according to Our World in Data.
beginning of 2024. The changing menus are freshly hand-cooked by regional partner chefs and are provided in a refrigerator. Attention is also paid to healthy, seasonal, and sustainable ingredients. The contents of the refrigerator are adapted and replenished according to the employees’ preferences based on data collected. This ensures a balanced selection and minimises food waste.
– During the reporting year, the switch to a full green electricity tariff was reviewed and implemented. As a result, the FMA’s electricity consumption is now climate-neutral.
– To further reduce motorised private transport, the decision was made to purchase FMA bicycles. The bicycles will be available to employees starting in March 2024 and will be used in particular for short business trips.
– The FMA’s new management training concept places a special focus on sustainability. As multipliers, managers play a key role in the transition to a more sustainable working environment and are called upon to contribute to cultural change.
– The FMA’s lighting concept was adjusted in the reporting year. In the parking garage in particular, lighting and energy consumption were reduced.
– Paper consumption was reduced significantly. Printing costs were reduced from roughly CHF 20,000 in 2022 to CHF 5,500 in the reporting year. This was made possible by increasing digitalisation.
As a public enterprise, the FMA bears a special responsibility towards the environment and society and has a particular obligation to make an effective contribution. To exploit synergies and share proven approaches, the FMA coordinates its activities with the Liechtenstein Government, the National Administration, and other relevant interest groups. At the international level, the Financial Market Authority cooperates with the Network for Greening the Financial System (NGFS), of which it has been a member since the end of 2022.
Seasonal and regional catering options support the goals of the sustainability strategy.
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CYBERSECURITY – A CHALLENGE FOR THE MARKET AND THE FMA
More than 10 terabytes of data are stolen in the EU through cyber attacks – every month. Phishing and ransomware Trojans are among the most significant cyber threats in the EU. DDoS (distributed denial of service) attacks also pose a significant threat. The worldwide cost of cybercrime to the economy amounted to an estimated EUR 5.5 trillion at the end of 2020, double the amount for 2015. The war in Ukraine has further exacerbated the threat situation. The conflict has activated numerous hacktivists, cybercriminals, and state-supported groups. Liechtenstein intermediaries are also affected. The FMA accordingly attaches great importance to cybersecurity.
Cyber risks pose challenges for both financial market participants and the FMA. Security incidents in the use of information and communication technologies (ICT), such as data leaks and system failures, can cause immense damage. Attacks with criminal intent are also becoming more prevalent.
Financial service providers are among the most popular targets of cyber attacks. Not only the companies themselves are at risk. The attacks jeopardise the protection of clients and ultimately also the stability of the entire Liechtenstein financial market. ICT security incidents such as data leaks and
system failures can result not only from external events such as cyber attacks, but also from internal errors or insufficient infrastructure. Greater networking increases the potential vulnerability of the ICT infrastructures of financial service providers. This is another reason why the FMA attaches great importance to cybersecurity.
The ICT Guideline, which entered into effect in 2022, defines the requirements in accordance with international standards that intermediaries must meet when dealing with ICT risks. These requirements were the focus of the FMA’s supervisory activities in 2023.
Clear requirements minimise the risk of ICT security incidents and show market participants how they can counter ICT risks. The ICT Guideline includes requirements for the strategy and governance of financial service providers as well as for information security risk management and the associated structures and processes. Proportionality is also taken into account. The requirements are based on the risk structure, complexity, size, scope, and type of business of a financial service provider. Since 2020, 18 attacks on Liechtenstein financial intermediaries have been reported to the FMA – some of which were carried out using a combination of methods. In two cases, it was possible to quantify the effective financial loss suffered by the financial intermediary.
TYPES OF CYBER INCIDENTS
Ransomware is a type of malware that restricts or prevents access to data and systems. A ransom is then demanded for releasing the data or system. Such a malicious program either blocks all access to the system or encrypts certain user data.
Malware is software developed with the aim of executing unwanted and usually harmful functions on an IT system. Malware often spreads on traditional IT systems via email attachments or manipulated websites or data carriers.
Phishing attacks are fraudulent emails, text messages, phone calls, or websites designed to trick people into downloading malware or giving away confidential information.
DDoS (Distributed Denial of Service) is a type of cyber attack that attempts to overload a website or network resource by flooding it with malicious traffic so that it can no longer be operated.
Social engineering exploits human characteristics such as helpfulness, trust, fear, or respect for authority to cleverly manipulate people and trick them into disclosing confidential information, bypassing security functions, making bank transfers, or installing malware.
Both incidents were caused by malware. In total, 12 incidents were attributable to ransomware, 10 to other malware, 2 to phishing, 6 to DDoS attacks, and 6 to social engineering.
Figure 1 Cyber incidents per year **Cases considered until mid-year.
SUPERVISION AND RESOLUTION PROGRESS REPORT
The past year was characterised by persistently high inflation, rising interest rates, and a weakening of the global economy. Against this backdrop, the financial stability risks at the international level remained high. The resolution authority updated three group resolution plans for the systemically important banking groups and one group resolution plan for smaller financial intermediaries. In addition, development of the Liechtenstein resolution financing mechanism was continued. During the reporting year, Macroprudential Supervision was closely involved in the preparatory work for Liechtenstein’s possible accession to the IMF. In this context, an initial balance of payments for Liechtenstein was estimated under the leadership of the FMA and in close cooperation with the SNB and the Office of Statistics. Providing this data was a prerequisite for Liechtenstein to submit its official application for membership to the IMF at the end of May 2023.
IMPACT OF RISING INTEREST RATES ON THE REAL AND FINANCIAL ECONOMY
The past year was characterised by persistently high inflation, rising interest rates, and a weakening of the global economy (Figure 2). Against this backdrop, the financial stability risks at the international level remained high. Although the financial sector in general and the banking sector in particular are benefiting from the recovery of the financial markets and rising interest rates, financial market players could face increasing challenges in the coming months. The financial markets are currently reflecting a relatively optimistic scenario, in anticipation of only a mild economic slowdown, a rapid decline in inflation, and an imminent reduction in interest rates. Against this backdrop, the financial markets remain vulnerable to unexpected negative developments, given that inflation may prove more persistent than predicted and economic fragility could intensify further. Risk premiums have also remained low over the past year, even though rising interest rates are increasing the financial burden on companies accordingly. Higher interest rates could also revive discussions about the sustainability of public debt, especially if interest rates remain high for an extended period of time (Figure 3).
Economic development remained below average last year in Liechtenstein as well. The KonSens economic indicator, which is published on a quarterly basis by the Liechtenstein Institute, has been in negative territory for almost two years now, signalling weak economic development. This phase represents the longest continuous period of negative KonSens values since the negative phase of 2001 to 2003. This is due in particular to weak export growth, given that both cyclical and structural factors are dampening external demand. The weakness in the domestic economy is currently being caused by both the slump in the global industrial sector and weak global trade. Structural factors also play a role in this regard. In particular, globalisation has slowed down noticeably since the
global financial crisis, with the ratio of global trade to gross domestic product stagnating in recent years. Rising geopolitical tensions and the increasing fragmentation of the global economy pose additional challenges for Liechtenstein’s economic prospects. These factors can create uncertainties and trade barriers and make it more difficult for small, exportoriented economies to be successful on the global market. The development of Liechtenstein’s economy therefore remains heavily dependent on global economic trends, in light of its high export orientation.
The turnaround in interest rates has increased vulnerabilities in the real estate and mortgage market as well. Although the financial burden on borrowers in the Swiss franc currency area remains limited due to moderate interest rate increases, the financial cycle has ultimately turned here as well. The correction on the real estate markets has been orderly so far in most European countries. In Liechtenstein as well, the short-term risks in the household sector are likely to be limited compared to other countries due to the moderate growth in real estate prices in recent years, the high proportion of fixed-interest loans, the high resilience of the banking sector, and the robust labour market. However, given that private household debt in Liechtenstein is among the highest in Europe, the structural vulnerabilities are elevated and must be addressed with appropriate measures in order to continue to ensure stability in the medium and long term.
The banking sector in Liechtenstein benefited from rising interest rates last year. Despite this, profitability in the Liechtenstein banking sector – measured in terms of return on equity – continues to lag significantly behind banks in the EU and the US. While the high capitalisation explains part of this difference, a closer analysis shows that – in contrast to other countries – costs have risen in line with interest income, which limits the increase in profitability accordingly. Against the backdrop of higher interest margins, the income structure in the banking sector has also
changed significantly over the past year. While the share of fee and commission income fell, the share of interest income in total income increased. Against the backdrop of higher interest rates, banks could be confronted with rising refinancing costs and increased credit risks in future. Although this constitutes an additional challenge for the banking sector, the impact is likely to be less pronounced than in other countries thanks to lower inflationary pressure, moderate interest rate increases in the Swiss franc currency area, and the robust capitalisation and liquidity situation.
Risks in the non-banking financial sector remain limited. Although the profitability of the insurance sector is below average compared to other European countries, the sector has robust capitalisation, which contributes significantly to the stability of the sector. At the same time, uncertainties in the insurance sector remain significant, given that rising inflation might directly increase the cost of claims and thus negatively impact margins and profits in future. While public pension provision (Old-Age, Survivors, and Disability Insurance; first pillar) and private pension schemes (second pillar) had to deal with significant market-related losses in 2022, the pension system benefited from the market recovery in the reporting year. The sector may benefit from higher interest rates
in the medium to long term as well. Investment funds in general are exposed to comparatively low risks. Identified risks in the area of consumer protection and supervisory powers are not specific to Liechtenstein. Beyond this, potential profitability risks for some (mostly smaller) domestic funds underscore the need for more in-depth regulatory supervision to ensure the resilience of the non-banking financial sector.
Overall, the Liechtenstein financial sector is characterised by continued stability and solidity, and systemic risks continue to be assessed as limited. The Liechtenstein financial sector is well equipped to master the challenges ahead. Nevertheless, in view of increasing global uncertainties, geopolitical tensions, and financial turbulence, it is essential to maintain a high level of capitalisation and resilience in the financial sector. For this purpose, a range of macroprudential tools are available that can continue to be deployed as required.
Sophia Doeme, Deputy Head of Section Macroprudential Supervision
Figure 2
Inflation (annual, in %)
Source: Bloomberg.
TRENDS AND RISKS
At the end of each year, the FMA publishes its priorities of supervision for the following year. These are based on a prior assessment of trends and risks, which are summarised below.
Macroeconomic environment: At the international level, financial stability risks remain high due to persistent inflation and weaker growth prospects. Due to a sharp rise in interest rates, global economic activity slowed last year, while inflation fell only gradually. The economic slowdown is especially noticeable in the industrial and manufacturing sector and is leading to subdued global trade. The financial markets remain susceptible to further corrections. While equity valuations recovered starting at the beginning of the year, the first corrections already followed in the course of the year. Moreover, the markets are currently optimistic with regard to future earnings and growth, as well as a relatively rapid decline in inflation, which could lead to possible negative surprises.
Money laundering: Due to the small size of the Liechtenstein domestic market, Liechtenstein financial service providers are predominantly active in crossborder business. The financial centre is therefore strongly oriented towards the provision of services for
persons abroad. This international orientation offers Liechtenstein financial market participants many opportunities, but also entails certain risks due to the persons and countries involved and the increasing complexity of business relationships. The FMA there-fore continues to assess the risk of money laundering as high. Violations of supervisory law can result in considerable sanctions and reputational damage for financial institutions both abroad and in Liechtenstein. The FMA has recently identified a number of violations of money laundering provisions by various players in the Liechtenstein financial centre. This indicates that the risks for financial institutions in the cross-border wealth management business remain high. The use of offshore companies and complex structures continues to increase risk. Liechtenstein last underwent a country assessment by MONEYVAL in 2022. In this international comparison of national anti-money laundering measures, Liechtenstein’s marks were very positive.
Climate, social, and governance risks (ESG risks):
The transition to a climate-friendly economy remains challenging. Assessing the impact of physical and transitory risks on financial institutions is complex. Although banks in Liechtenstein have limited exposure to companies with high emissions, some banks could be exposed to climate risks through their mortgage loans. Similarly, the insurance sector faces
Figure 3
Key rates of central banks (in %)
Source: Bloomberg.
rising climate risks caused by the increasing frequency and unpredictability of natural disaster events. Although the availability of data at an international level is still a problem, monitoring of climate-related risks must be improved in future, especially in order to assess climate risks appropriately. The EEA Financial Services Sustainability Implementation Act (EWR-FNDG), which entered into force on 1 May 2022, makes the EU Disclosure Regulation and Taxonomy Regulation applicable in Liechtenstein by way of national law. The implementation of the legal requirements poses a key challenge for intermediaries and the financial centre as a whole. These implementation challenges increase the risk of greenwashing.
ICT and cyber risks: The use of information and communication technology (ICT) by financial institutions and their clients has increased significantly in recent years. The number of cyber attacks is also steadily increasing. The war in Ukraine has made it clear that attacks on infrastructures represent a key risk. Further geopolitical developments could drive the number of cyber attacks even higher. Cyber incidents pose a systemic risk to the financial system, with the potential to severely disrupt critical financial services and operational processes. It should also be noted that dependencies exist outside the regulated domain as well. The loss of data suppliers due to cyber attacks would also have significant damage potential. Decentralised forms of work and digital business models have increased the dependency on a smoothly functioning infrastructure. The use of cloud computing and new technologies entails further vulnerability to cyber attacks.
Beat Waefler, Chief Supervisor and Head of Supervision Section in the Insurance and Pension Funds Division
QUALITY ASSURANCE FOR AUDITORS
The FMA has been responsible for the supervision of auditors since the amendment of the Auditors and Auditing Companies Act (WPRG) in 2011 transposing the EU Statutory Audit Directive. Since the initial implementation of the supervisory system, super-visory activities have been continuously further developed. For example, a cross-divisional interface was created, quality assurance reviews were introduced, and the follow-up enactments of the European Commission were implemented.
With the entry into force of the Auditors Act (WPG), which replaced the WPRG, the legal basis was comprehensively revised in 2021, and at the same time Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014 amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts was transposed.
Prudential supervision of auditors and audit firms includes issuing and withdrawing licenses, monitoring continued compliance with licensing requirements, disciplinary authority, conducting due diligence inspections, and maintaining the register of auditors. In addition, the FMA is responsible for issuing confirmations, announcing the auditor’s examination (authorisation or suitability examination), and authorising auditors. An important part of the supervision of auditors and audit firms is also the performance of quality assurance reviews.
The FMA supervises a total of 88 auditors and 36 audit firms. Of these, 38 auditors and 15 firms are financial service providers domiciled abroad engaged in the free movement of services. The quality assurance review comprises a firm review and a file review. As part of the firm review, the appropriateness of the quality management systems, the existence of ongoing training, the quantity of fees, and indepen-
dence are reviewed. The file review covers engagement-related quality assurance, the quantity and quality of resources, and compliance with auditing standards. In the current cycle (since 2019), 18 quality control reviews have already been carried out. An average of 4.5 findings were made. The findings include, for example, inadequate documentation of the quality assurance system, an unqualified audit opinion despite material and comprehensive misstatements in the financial statements, and the performance of an audit by an unlicensed firm. If findings were made, the FMA took appropriate measures. In the examples mentioned, a complete revision of the quality assurance manual and the quality assurance mechanisms was required, the recipient of the report was informed that the audit opinion issued could not be relied upon and, in the last case, a criminal complaint was filed.
The quality assurance reviews aim to ensure that auditors comply with the required standards. In this way, the reviews ultimately serve to protect clients and the reputation of Liechtenstein’s financial centre. With the introduction of the inspection system for auditors of public-interest entities (banks and insurance undertakings) and sustainability reporting audits, the supervision of auditors is currently undergoing a further significant expansion.
MACROPRUDENTIAL SUPERVISION
The financial crisis showed that – alongside the microprudential perspective, which focuses on the stability of individual institutions – macroprudential supervision is also necessary. Macroprudential supervision helps to protect the stability of the financial system as a whole, in particular by strengthening the resilience of the financial sector and reducing the accumulation of systemic risks.
Responsibility for macroprudential policy and supervision is divided among several actors in Liechtenstein.
Because Liechtenstein does not have its own central bank, the FMA assumes responsibility for the stability of the financial sector pursuant to Article 4 FMAG. Institutionally, this means the FMA plays the institutional role in the area of financial stability that central banks in other countries typically fulfil. To strengthen financial market stability and reduce systemic and procyclical risk, a Financial Stability Committee (FSC) was also established in 2019, composed of representatives of the Ministry of General Government Affairs and Finance and the FMA. By recommending macroprudential measures and issuing risk warnings, the FSC can initiate supervisory measures or amendments to ordinances or laws. The deliberations and discussions in the FSC are based on the financial stability analyses and expert opinions of the FMA.
In addition to the core tasks of macroprudential supervision, activities in the 2023 reporting year focused on two special topics in particular: Firstly, the measures to address the risks identified in the real estate and mortgage market were finalised in close cooperation with the banking sector, and secondly, Macroprudential Supervision was heavily involved in the preparatory work for Liechtenstein’s possible accession to the International Monetary Fund (IMF).
In recent years, the FMA has repeatedly drawn attention to the vulnerabilities arising from the high level of private household debt in Liechtenstein. Following a risk warning to this effect from the European macroprudential supervisory authority – the European Systemic Risk Board (ESRB) – regarding significant medium-term risks in the real estate market in Liechtenstein, a working group with representatives of the FMA and the Liechtenstein banking sector was established at the beginning of 2022 to develop proposals for solutions to address the identified risks. As a first step, the working group elaborated a common understanding of the risks in the Liechtenstein real estate and mortgage market in order to develop measures to address the risks in a targeted
manner. Based on this preliminary work, the FSC published a recommendation in July in three key areas, namely (1) to improve data availability, (2) to strengthen risk awareness, and (3) to adjust the existing borrower-based measures in Liechtenstein.
BORROWER-BASED MEASURES
To ensure adequate risk monitoring when a loan is declared as an exception to policy (ETP), the adjusted measures call in particular for the application of uniform market-wide standards not only in terms of the loan-to-value ratio, but also in terms of affordability. At the same time, the provisions do not stipulate a maximum limit on the number of such exceptional loans that can be granted, so as to allow banks appropriate flexibility in their risk management when granting loans.
Macroprudential Supervision was also closely involved in the preparatory work in the reporting year for Liechtenstein’s possible accession to the IMF. In this context, an initial balance of payments for Liechtenstein was estimated under the leadership of the FMA and in close cooperation with the SNB and the Office of Statistics. Providing this data was a prerequisite for Liechtenstein to submit its official application for membership to the IMF at the end of May 2023. The preparatory work continued intensively in the second half of the year with the visit of a high-ranking IMF delegation in July, the official membership mission in November and December, and numerous consultations with the various specialist departments of the IMF, the SNB, and the various offices of the National Administration. The accession negotiations are now so far advanced that the Liechtenstein Parliament is expected to be able to discuss and decide on accession before the summer of 2024.
As part of the core tasks of macroprudential supervision, the FMA and the FSC also dealt with the
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turbulence in the US and Swiss banking sector and the associated implications for Liechtenstein, with a recalibration of the various macroprudential capital buffers, and with the implementation of existing and new ESRB recommendations. The annual Financial Stability Report, which illuminates systemic risks in the entire Liechtenstein financial sector and was presented to the public at the Financial Stability Forum in November, also makes an important contribution to financial market stability. In addition, the quarterly National Economic Monitor on international economic and financial market developments also draws attention to the development of systemic risks in the Liechtenstein financial sector. Alongside the publication of risk warnings and recommendations, this contributes to strengthening the risk awareness of market participants.
Martin Gaechter, Head of Financial Stability Division
LICENSES, APPROVALS, REGISTRATIONS
In Liechtenstein, the provision of financial services subject to authorisation requires a licence issued by the FMA. The rules governing entry to the Liechtenstein financial market should be understood primarily in terms of client protection. The goal is to ensure the high quality of market participants and the seriousness of transactions. The licence is both a mark of quality and a preventive control instrument of the Financial Market Authority. The FMA not only issues licenses, however, but also monitors ongoing compliance with the licensing requirements. In the event of changes to a licensed financial intermediary, the financial intermediary is required to notify the FMA immediately.
Changes subject to notification and approval include, for example, changes to the general management or the board of directors, changes to qualifying holdings, or a change of auditor. If licensing conditions are not met on a permanent basis, the FMA will withdraw licences where necessary.
In the reporting year, the number of banks in Liechtenstein decreased again by one due to the liquidation of one institution. As of the end of 2023, 11 banks were licensed in Liechtenstein. The number of authorised insurance companies remained constant, with one company entering and one exiting the market. There were also market entries and exits in the asset management sector, while the total number of licensed asset management companies remained constant. One new electronic money institution was licensed in May 2023, bringing the total number to three. A decline can be observed due to consolidation in the fiduciary sector. Contrary to the long-term trend, the Liechtenstein fund centre did not record any major growth.
Approval of securities prospectuses
The FMA is responsible for reviewing and approving prospectuses and supplements for the public offer of securities or their approval for trading on a regulated market. Securities prospectuses are reviewed by the FMA for completeness, coherence, and comprehensibility. Securities prospectuses are intended to eliminate information asymmetries between investors and issuers. The number of approved prospectuses in the reporting year was 22.
Registrations under the TVTG
A consequence of the digital transformation of the financial sector is that the FMA’s licensing activity is increasingly focused on business models based on new financial technologies. The challenge for the FMA is to understand these often complex, very technology-heavy business models and to identify
risks. In order to prevent forum shopping – i.e. the exploitation of regulatory areas with differing structures – the practice of other supervisory authorities within Europe must also be taken into account. The Token and TT Service Provider Act (TVTG) creates legal certainty in this area. There was particular interest in registration as token issuers, as TT exchange service providers, and as token depositaries. At the end of 2023, registration applications from 13 companies for a total of 29 roles under the TVTG were being evaluated. The Regulatory Laboratory/Financial Innovation unit of the FMA is the contact point for questions regarding the obligation to register business models involving financial technologies. During the reporting year, it received a total of 101 enquiries from the market (previous year: 109). 21 of these were subordination enquiries. The examination of due diligence concepts to combat money laundering plays an important role in the registration of TT service providers. With the enactment of the TVTG, the FATF recommendations were implemented providing for due diligence supervision of such services. Due to the technological complexity of the business models, the examination of the due diligence concepts has proven to be time-consuming.
In 2023, 10 companies were registered for a total of 20 roles under the TVTG. During the same period, one company renounced its registration that had already been issued. As a result, 29 service providers were registered for 64 roles in the TT Service Provider Register at the end of 2023, providing services as TT exchange service providers (16), token depositaries (13), token issuers (10, including 6 own issuers), token generators (10), TT identity service providers (3), TT price service providers (2), TT key depositaries (3), and physical validators (1).
ONGOING SUPERVISION
Prudential supervision of the individual supervised financial intermediaries aims to ensure permanent compliance with the licensing conditions, including in particular the financial resources of market participants, and to identify risks at an early stage. Prudential supervision is governed by the relevant special laws, such as the Banking Act and the Insurance Supervision Act, and makes a significant contribution to client protection and to the stability of the financial market. In addition to prudential supervision, ongoing supervision also encompasses due diligence to combat money laundering as well as conduct of business supervision. The basic instruments of ongoing supervision include reporting, auditing, on-site inspections, and management meetings.
Based on the risk analysis, the FMA defines its supervisory priorities for the current audit period. In addition to cross-sectoral supervisory priorities, the FMA also sets targeted, sector-specific supervisory priorities, which are generally aligned with the supervisory programmes and strategic guidelines of the European Supervisory Authorities. In the reporting year, the FMA set the following cross-sectoral supervisory priorities:
– Monitoring of market developments, the interest rate environment, and inflation
– Monitoring of real estate and mortgage risks
– Money laundering prevention
– Establishment of sustainability-related supervisory review (ESG risks)
– ICT security
In addition, the European Supervisory Authorities are entitled to set strategic supervisory priorities of the European Union. These priorities must be taken into account by the national supervisory authorities, with the aim of supervisory convergence among the EEA Member States.
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With regard to market developments, the interest rate environment, and inflation, the focus was on the increased macrofinancial risks against the backdrop of high inflation and rising interest rates as well as the associated impact on the financial sector. This topic was addressed in the management meetings. In the case of banks, risks associated with interest rates, the quality of investments, and business continuity management were closely monitored. In the case of insurance undertakings, business models were increasingly monitored with regard to their sustainability in the current environment. This also included the formation of appropriate technical provisions due to rising inflation. At the same time, the development of coverage ratios at pension schemes was closely monitored.
With regard to real estate and mortgage risks, risk monitoring was expanded due to the high level of household debt. In addition, the identified risks were addressed in cooperation with the banking sector, and corresponding measures were adopted.
Money laundering prevention continued to be a key supervisory focus of the FMA in 2023. The FMA continued its rigorous risk-based supervision, taking up the recommendations of the MONEYVAL assessment. The focus was also on the control and monitoring mechanisms implemented to ensure compliance with international financial sanctions.
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The development of the FinTech sectors
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ESG risks were a key supervisory priority in 2023. Following improvement of the previous lack of clarity and transparency with the help of regulatory requirements in 2022, the focus in 2023 shifted to requirements from the Disclosure Regulation and the Taxonomy Regulation as well as the sectoral requirements regarding the consideration of sustainability risks and the requirements for accounting-related sustainability reporting.
With regard to ICT risks, in particular the implementation status of FMA Guideline 2021/3 on ICT security, which entered into effect in 2022, was determined at the intermediaries covered by the guideline. In 2023, the audit reports of the audit offices on the implementation of the guideline were available for the first time. The audit reports were used to gain an understanding of the existing risks and measures.
Investment firms that conduct transactions with financial instruments must report all transactions in detail to the competent authority. The aims include combating insider trading and market manipulation and strengthening investor protection. The transaction data received by the FMA is examined using various scenarios relating to insider trading and market manipulation. The stored parameters are adjusted on an ongoing basis according to market events and market behaviour. In addition to indications of market abuse, transaction monitoring can also identify risks that jeopardise the functioning of the markets. The FMA not only receives reports from investment firms domiciled in Liechtenstein, but is also connected to supervisory authorities throughout Europe via the system that has been established for that purpose.
Investment firms or other supervisory authorities submitted about 8.4 million (previous year: 9.5 million) transaction reports to the FMA in 2023, which amounts to more than 23,000 (26,000) reports daily. The volume of reported transactions amounted to approximately CHF 160 billion (189 billion). In general, the previous
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year’s trading volume was not sustained in 2023. The months of February and March saw the highest trading activity, with March showing significantly less activity compared to the previous year.
The transmitted transactions were validated at the technical level, subjected to content-related data quality tests on an ongoing basis, and evaluated. If the scenarios give rise to suspicion that indicate misconduct on the part of market participants, the FMA carries out further clarifications or takes appropriate measures. In the reporting year, a total of 1,142 (1,268) hits were generated that were analysed and evaluated.
The sanctions imposed by the US Office of Foreign Assets Control (OFAC) were taken into account in the FMA’s supervisory activities. An OFAC sanction is potentially a major reputational risk for the Liechtenstein financial centre. Even if OFAC sanctions have no direct legal effect in Liechtenstein, as in all other European countries, they are highly relevant for the financial centre from a risk perspective.
Based on the risk analysis, the FMA defines its supervisory priorities for the current audit period.
On-site inspections
An on-site inspection is an institutionalised audit activity within the framework of ongoing supervision and enforcement on the premises of the financial intermediary. An on-site inspection is carried out by employees of the FMA. On-site inspections may be announced or unannounced. The FMA conducts a number of planned on-site inspections each year, as well as on an ad hoc basis where necessary. As a rule, on-site inspections are dedicated to one or more priority topics. In the reporting year, 30 on-site inspections were carried out.
Auditing
As part of prudential supervision, the FMA evaluates the audit reports submitted by auditors who, on behalf of the FMA, perform a risk-based audit of compliance with the regulatory requirements by the financial intermediaries. Where deficiencies arise, the FMA takes the necessary measures, or it sanctions the financial intermediary in accordance with the legal requirements. The audits are based on the FMA’s Audit Guideline. The Audit Guideline governs the procedure to be observed in the audits and reports of the external auditors authorised under the special laws, and it serves to ensure the high quality and uniform administration of supervisory audits. The uniform and detailed requirements governing audits make a significant contribution to the convergence of supervisory practice and implementation of risk-based supervision.
Reporting
Under the special laws, financial intermediaries are required to provide the FMA with the data necessary to evaluate the company and its risks. On the basis of the reports, the FMA verifies compliance with regulatory requirements and follows the business development of the supervised financial intermediaries
in a timely manner. “Reports“ refers to all legally required periodic or ad hoc information obligations of the financial intermediary vis-à-vis the FMA. This includes annual reports, semi-annual reports, quarterly reports, and other regular reports. Most reports under the reporting system are received via the FMA’s e-Service Portal. The portal was introduced in 2015 and provides a convenient way for notifying entities from all sectors to submit data online. In the reporting year, a total of 12,500 reports (previous year: 11,000) were submitted via the portal.
Management meetings
FMA representatives hold regular management meetings with members of the general management and board of directors of supervised entities. The business strategy and business development of the companies as well as current topics are discussed. A total of 45 management meetings were held in the reporting year, including five with banks, 12 with asset management companies, six in the fiduciary sector, and 17 with insurance undertakings. In addition to strategic orientation and business development, governance and organisational topics were discussed. ESG risks were also addressed. Client complaints and the implementation of complaints and recommendations were also discussed with asset management companies and management companies.
Table 4
On-site inspections. For inspection activities relating to due diligence supervision for the purpose of combating money laundering, see the chapter on due diligence supervision.
Table 5
Review of audit reports
This overview does not include audit reports for the purpose of preventing money laundering (see the chapter on due diligence supervision
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AD HOC SUPERVISION OF TT SERVICE PROVIDERS
The obligation to register under the Token and TT Service Provider Act (TVTG) sets minimum requirements for all TT service providers in Liechtenstein. These requirements are especially important from the perspective of user protection. TT service providers are not subject to the same regulatory requirements as classic financial service providers, however. The review conducted for the registration of a TT service provider is more limited in both scope and depth in comparison with the licensing of a financial service provider. TT service providers are also not subject to ongoing prudential supervision, but rather to ad hoc supervision. The level of protection of clients ensured by supervision accordingly differs from that of a licensed financial intermediary. To obtain a better overview of the market despite the lack of prudential supervision, the FMA collects general information on the business activities of registered FinTechs on an annual basis as part of periodic reporting.
The FMA continued to monitor market activity in 2023 and carried out in-depth clarifications in a large number of cases (also together with the supervisory divisions). This was particularly the case when the impression arose that services requiring registration were being offered without the requisite registration.
The FMA also took action in the case of other irregularities; in one case, for example, the FMA punished a breach of various reporting obligations by a registered TT service provider. In addition, the FMA published several warning notices in the FinTech sector and informed other authorities about relevant fact patterns.
Table 6
Reporting
This overview does not include reporting under the Due Diligence Act (SPG) for the purpose of combating money laundering, see the chapter on due diligence supervision
DUE DILIGENCE SUPERVISION TO COMBAT MONEY LAUNDERING
In the reporting year, the FMA once again rigorously pursued the change in strategy for due diligence supervision it initiated at the beginning of 2019. The riskbased supervisory approach was strengthened by continuing to focus the FMA’s inspections in particular on persons subject to due diligence and financial sectors with an increased risk profile. The risk profiles are established on the basis of information from the reporting system pursuant to the Due Diligence Act (SPG), as part of which financial market participants must report annually to the FMA on inherent money laundering risks and the quality of their risk mitigation. On a supplementary basis, the FMA continuously evaluates information it receives in the course of its supervisory activities (e.g. ongoing inspections, press or media articles, reporting by partner authorities in Liechtenstein and abroad, etc.).
In accordance with the risk-based supervisory approach, the content of the inspections also focused on the vulnerabilities identified in National Risk Assessment II. As a consequence of the change in strategy, the FMA has also significantly increased the number of its own on-site inspections, in order to obtain a direct and comprehensive picture of the quality of due diligence measures in addition to the findings derived from the mandated inspections (audits carried out by auditors).
Both the FMA’s own due diligence inspections and the mandated inspections were based on the supervisory priorities defined for 2023 in each sector. In the case of mandated due diligence inspections, the thematic SPG audits focused in particular on the four topics of risk-appropriate monitoring of business relationships and transactions, simple and special investigations, reports of suspicion, and the proper implementation of international financial sanctions. In the banking sector, the mandated due diligence inspections in 2023 once again focused in particular on high-risk transactions (such as transactions with a nexus to high-risk countries, pass-through and cash transactions, etc.).
The FMA’s own due diligence inspections additionally focused on the vulnerabilities identified in National Risk Assessment II and defined as priorities for action in the corresponding Government action plan. In this
context, special attention was paid to vulnerabilities such as product and service risks associated with transaction banking, service companies, sole signing authority, and cash and precious metal transactions.
Because of the special situation relating to the war in Ukraine since February 2022 and the resulting sanctions packages, the FMA continued to pay special attention in all of its own inspections on compliance with financial sanctions in accordance with the International Sanctions Act (ISG) and potential evasion of those sanctions.
During the reporting period, the FMA conducted its own on-site inspections at three banks. These were focused inspections with a risk-based emphasis. In addition to the organisational (firm) reviews in the priority areas, 32 random samples were drawn and examined. In several cases, deficiencies were identified in connection with the client risk assessment, the client business profiles, and inadequate transaction clarifications. Recommendations were also made during the on-site inspections in connection with the reports of the compliance and investigating officers as well as in the area of risk-appropriate monitoring of transactions.
The FMA carried out its own on-site inspections with risk-based priorities (focused inspections) at four life insurance undertakings and two life insurance intermediaries. A total of 40 random samples were drawn and examined last year, in addition to the firm review. Deficiencies were identified in particular with regard to client risk assessment, the informative value of business profiles (source of funds), and the audit procedures of the investigating officer.
The due diligence category “Trust and company service providers“ includes professional trustees and trust companies as well as persons under the 180a Act. The FMA carried out a total of 21 consolidated on-site inspections in the reporting period, three of
which were extraordinary on-site inspections. A total of 66 trust and company service providers (trust companies, professional trustees, and persons licensed under the 180a Act) were subject to a focused inspection in this context and, in addition to the firm review conducted in each case, a total of 144 random samples were drawn and examined.
The inspections showed that, in general, the quality of due diligence in the fiduciary sector is predominantly good, and only isolated or no findings were made in the majority of the inspections. Some significant exceptions in individual inspections concerned deficiencies with regard to the information in the business profile on the source of funds/source of wealth, compliance with reporting obligations in cases of suspected money laundering, and the review of client relationships with regard to possible violations of sanctions.
The FMA conducted a total of five focused inspections of asset management companies last year. 38 samples were drawn and examined. Apart from a few primarily formal weaknesses, only a few deficiencies were identified overall (in particular relating to business profiles, including verification of the origin of funds). In addition, the FMA conducted three of its own on-site inspections at management companies/ AIFMs authorised to carry out individual portfolio management.
In addition, 48 funds which are either self-managed or managed by six management companies and AIFMs were audited. It was ascertained that all of these funds were subject to a new risk assessment in accordance with the SPG. As a result of these reassessments, about half of the funds were no longer able to apply simplified due diligence pursuant to Article 22b(3) SPV. Overall, the FMA was able to satisfy itself that, with a few exceptions, the defence mechanism in the fund sector is robust.
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Finally, the FMA also carried out three of its own on-site inspections of TT service providers during the reporting period. In addition to the risk-appropriate monitoring of business relationships, the focus was also on business profiles and the identification of beneficial owners. 32 random samples were drawn as part of these inspections. In two of the three inspections, significant deficiencies were identified in connection with the risk-appropriate monitoring of business relationships/transactions. In addition, isolated deficiencies were identified in the plausibility check of the source of funds and the risk assessment.
In addition to the FMA’s own inspections, focused inspections were mandated for three banks, 28 asset management companies, six life insurance companies, two life insurance intermediaries, 188 investment funds, one fund management company with individual portfolio management, and five TT service providers. In the fiduciary sector, 32 consolidated on-site inspections were commissioned.
In sum, the mandated inspections once again showed generally good results and robust defence mechanisms, with only a few inspections identifying an elevated number of deficiencies. Overall, the findings in each sector are consistent with the findings from the FMA’s own on-site inspections, as in the previous year.
Own / mandated inspections
inspections
inspections
Table 8
Due diligence inspections
* to ensure comparability, these figures were corrected and adjusted for life insurance agents and life insurance intermediaries without activities subject to due diligence (zero reporters) ** of which token issuers not subject to registration pursuant to Article 3(1)(s) SPG (7 in 2021; 15 in 2022; 11 in 2023) *** includes electronic money institutions, agents of EEA payment institutions, fund management companies with individual portfolio management, investment firms, casinos, and persons subject to due diligence pursuant to Article 3(3) SPG
INTERNATIONAL ADMINISTRATIVE ASSISTANCE
Supervisory authorities provide cross-border administrative assistance as needed. Administrative assistance is an important instrument in the cooperation between supervisory authorities. It supports the goals of financial market supervision to safeguard confidence in the financial markets, protect clients, and combat abuses. In 2023, a total of 70 requests for administrative assistance were submitted to the FMA asking for information. Conversely, the FMA submitted 94 requests to foreign supervisory authorities.
Non-client-related administrative assistance
Non-client-related information is information under supervisory law relating to the general activities of a supervised entity in its capacity as a market participant. In addition to information on solvency and liquidity, this includes in particular information on the governing bodies or ownership of a supervised entity as well as information on any supervisory or criminal proceedings against the supervised entity or its governing bodies or ownership. In 2023, 43 such non-client-related enquiries were addressed to the FMA by 27 supervisory authorities. Of these requests, 33 were good standing enquiries or requests for letters of confirmation. In the same period, the FMA submitted a total of 87 non-client-related requests for administrative assistance to 34 different foreign supervisory authorities.
Client-related administrative assistance
If the information to be transmitted concerns individual clients of financial institutions, this constitutes client-related administrative assistance, which is subject to strict formal requirements. The focus is on administrative assistance in the area of securities supervision on the basis of the multilateral memorandum of understanding with the International Organization of Securities Commissions
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(IOSCO MMoU). The main topics here are violations of insider legislation, market manipulation, activities without a licence, and investment fraud. Outside of securities supervision, client-related administrative assistance takes place according to special laws such as the Banking Act. In 2023, the FMA was requested for client-related administrative assistance in 27 cases. Of these, 24 requests were made on the basis of the IOSCO MMoU, three on the basis of special laws.
The Market Abuse Regulation (MAR) and its Implementing Regulations have been in force in Liechtenstein since 2021. As a rule, administrative assistance in the area of securities supervision under the IOSCO MMoU falls within the scope of this regulation. MAR contains its own rules on the cooperation of supervisory authorities in the Member States and thus also on administrative assistance; these rules apply directly and compulsorily in Liechtenstein. If national rules contradict those of MAR, they must not
The inspections showed that, in general, the quality of due diligence in the fiduciary sector is predominantly good.
be applied. If, on the other hand, subject matters are covered by national rules that are not regulated by MAR, the national rules continue to apply. Liechtenstein provides a special procedure for administrative assistance in the area of securities supervision that goes beyond the scope of MAR or its Implementing Regulations. In particular, the procedure specifies the form in which the requested information must be obtained from the requested authority, that a ban on information must be imposed on persons concerned and third parties, and that the Administrative Court must approve administrative assistance before the requested information is transmitted.
ENFORCEMENT
The FMA clarifies any indications it finds of violations of general criminal law or of the laws assigned to the FMA for execution. If the FMA arrives at a justified suspicion as a result of these preliminary investigations, or if the circumstances indicate that the reputation of the Liechtenstein financial centre is jeopardised, it initiates administrative or administrative criminal
proceedings, establishes the facts of the case, and orders any necessary measures and fines.
As of the end of 2023, the FMA was conducting 16 administrative proceedings and 19 administrative criminal proceedings. Administrative proceedings are proceedings for the enforcement of financial market rules governed by public law. Administrative criminal proceedings are proceedings carried out by the FMA to sanction violations of (supplementary) criminal law provisions set out in financial market legislation. During the reporting year, 192 proceedings and preliminary investigations were completed. The subjects of the proceedings included capital adequacy requirements, violations in risk management, market manipulation, organisational requirements, head office requirements, accounting requirements, compliance with licensing conditions, and governance.
On 7 March, the FMA announced Sora Bank AG’s voluntary liquidation and the renunciation of its licence. To ensure client protection, the FMA took the measures necessary for the execution of the liquidation and the settlement of ongoing business
7 FINMA (Switzerland)
Total 27 requests for administrative assistance
5 AMF (France)
Figure 5
Client-related requests for administrative assistance by authority (IOSCO MMoU and special laws)
and issued the necessary instructions to the liquidators. The FMA also supervised the liquidators and the liquidation.
On 21 November, the FMA announced that it had withdrawn the licence granted on 18 November 2020 to XOLARIS Capital AG, Vaduz, as an alternative investment fund manager due to failure to meet the licensing requirements pursuant to Article 32 of the Alternative Investment Fund Managers Act (AIFMG). XOLARIS Capital AG, Vaduz, was thereupon no longer entitled to perform activities in connection with assets of collective investment undertakings (AIFs), including their sub-funds, or to manage them.
On 14 December, the FMA made public on its website that the banking services of Mason Privatbank Liechtenstein AG in Liquidation had been wound up since 30 October 2023 in accordance with Article 3 of the Banking Act (BankG). Accordingly, Mason Privatbank Liechtenstein AG in Liquidation no longer held any deposits or other repayable funds. Mason Privatbank Liechtenstein AG’s licence to operate a bank had lapsed on 15 March 2021 pursuant to renunciation in writing in accordance with Article 27(1)(c) of the
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Reserve Bank of India (India) 1
BaFin (Germany) 1
SEC (USA) 1
ASC (Canada) 1
FMA (New Zealand) 1
DFSA (Denmark) 1
FCA (UK) 1
FMA (Austria) 2
CFTC (USA) 2
MNB (Hungary) 2
SECRS (Serbia) 2
Banking Act. The FMA had supervised the liquidators and the liquidation.
At the end of June, the FMA published its FMA Practice. The publication provides information in anonymised form on the FMA’s decisions and decrees as well as on decisions of the FMA Complaints Commission (FMA-CC) that concern the 2022 supervisory period. By describing selected cases, the FMA sets out each year how it applies and interprets supervisory law, thus creating transparency and predictability for financial intermediaries and setting out its expectations.
During the 2022 supervisory period, several decisions of particular relevance for the FMA’s further supervisory practice were taken. In one case, the FMA no longer considered a professional trustee to be trustworthy due to a criminal conviction abroad and withdrew his licence. The professional trustee was convicted of the crime of breach of trust in Austria and punished with a suspended prison sentence. The Administrative Court confirmed the withdrawal of the licence. For the Administrative Court, there is no doubt that a person subject to the supervision of the FMA
endangers and damages trust in the Liechtenstein financial centre if they have been convicted of a financial crime and sentenced to a high penalty and if, moreover, the act was also committed in the course of professional activities.
The same person was also active as a management body in several Liechtenstein insurance undertakings. The FMA determined that the person no longer had personal integrity and was therefore not suitable to perform the management functions. The person lodged an appeal against the administrative order, citing in part his largely good conduct since the completion of the offence a long time ago. The FMA Complaints Commission, the Administrative Court, and the Constitutional Court upheld the FMA’s decision. This is of particular relevance, given that it is the first time a decision has been made on the mere question of personal integrity as a permanent requirement for members of management bodies. The case also shows that it does not matter how long ago the incriminated conduct took place.
In another case, the FMA imposed a fine of CHF 400,000 on a legal person for a serious and repeated breach of due diligence obligations. The person subject to due diligence fully confessed to the administrative contraventions committed during a subordination procedure, acknowledged the fine imposed, and waived the right to appeal. In a separate administrative order, the FMA determined the total costs of the extraordinary inspection by an auditor and obliged the person subject to due diligence to pay those costs. Individual items claimed by the auditor had to be corrected or reduced after examination by the FMA. This shows that the FMA always strives to keep the costs caused by extraordinary on-site inspections as low as possible.
In 2023, the FMA imposed 16 legally enforceable fines amounting to CHF 1,498,500.
On 21 December 2023, the FMA imposed a fine of CHF 500,000 on a legal person for a serious breach of the provisions on risk management under the Banking Act and repeated breaches of due diligence obligations under the Due Diligence Act.
The FMA imposed a fine of CHF 120,000 on a legal person for repeated breaches of due diligence obligations (business profile). The FMA also imposed a fine of CHF 120,000 on a legal person for breaching the provisions on risk management.
Most of the fines were imposed for breaches of the provisions of the Due Diligence Act. Other fines related to the failure to report a change in the composition of the management body, the violation of reporting obligations under the Due Diligence Act and the Token and TT Service Provider Act, and the violation of information obligations under the UCITS Act. The penalties are published on the FMA website in anonymised or named form. The fines levied by the FMA are transferred to the National Treasury.
In 2023, the FMA filed nine criminal complaints with the Office of the Public Prosecutor. If the FMA becomes aware of a suspicion of a criminal act to be prosecuted ex officio that affects its legal sphere of action, it is required to file a criminal complaint. The criminal complaints filed included suspicion of market abuse, suspicion of accepting deposits without the required licence, suspicion of insider trading and unlawful disclosure of insider information, concealment of material facts, suspicion of fraud in connection with a clone firm, suspected violation of designation protection, and performance of activities without registration (TVTG). In a further 95 cases, the FMA filed charges against employers for neglecting their legal obligations, such as the payment of contributions or the obligation to join an occupational pension scheme.
During the reporting period, the FMA submitted 14 reports to the Financial Intelligence Unit (FIU). This occurs in cases of suspicion of money laundering, a predicate offence of money laundering, organised crime, or terrorist financing.
For the reporting year, the FMA received a total of 23 whistleblowing reports via the whistleblower section of the FMA’s website or by post. The reports contained information on potential violations of the law, such as a missing licence, information on violations relating to governance (compliance), lack of integrity on the part of managers, allegations of fraud, or tax offences. Of the reports received, six were forwarded to other domestic authorities, given the responsibilities concerned. In six cases, it was decided after reviewing the reports that the information did not provide sufficient grounds for suspicion to initiate further measures or that no violations of the law could be identified. Those reports for which the FMA was responsible were reviewed as part of its supervisory activities and, where necessary, appropriate measures were taken, e.g. warning notices were published as necessary, other official arrangements were made, or criminal charges were filed. Administrative proceedings and administrative criminal proceedings were also initiated.
The FMA published 14 warnings on its website in 2023. The FMA warned against ten clone firms and strongly advised against investing via their websites. Clone firms wrongfully claim the identity of a real company and attempt to induce users to invest via their websites or by sending emails. In four cases, companies also falsely gave the impression on their websites that they had a licence from the FMA. In each case, the FMA advised against making investments, responding to offers from the company, or transferring funds.
In May, the FMA also published an investor notice on investments in physical precious metals. The FMA had noticed an increase in enquiries about companies
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SUPERVISION AND ENFORCEMENT OF LAWS
As of the end of 2023, the FMA is responsible for supervising and enforcing 42 laws (Article 5(1) of the FMA Act), including the associated implementing ordinances and European Level 2 measures. Laws newly included in 2023: – European Covered Bonds Act (EuGSVG).
domiciled in Liechtenstein that had developed various models for trading in and storing physical gold and other precious metals. These companies sold these precious metals via the internet or through distribution structures, especially in other German-speaking countries, and then stored them in Swiss or Liechtenstein storage companies. The FMA stated that the sale, together with the subsequent safekeeping of the physical precious metals and the reporting of the holdings to investors, does not in principle constitute an activity requiring a licence under special laws and therefore does not require a licence from the FMA. The FMA recommended that investors carefully examine the ancillary costs associated with such offers (contract and administration costs) and compare them with conventional offers.
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FINTECH
MORE THAN JUST NEW BUSINESS MODELS
Technological innovations in financial services (FinTech) are increasingly changing the way financial services are offered and demanded. While FinTech opens up opportunities, it also harbours potential risks. The FMA’s approach is to use and shape regulation in such a way that established financial service providers and new companies can implement their business models. As a supervisory authority, however, it of course also considers the risks of technology-based business models and ensures that client protection is guaranteed, trust in the financial market is maintained, and the stability of the financial system is not jeopardised. Technological change must be viewed holistically in this regard. FinTech not only consists of the activities of FinTech companies, but also depends on relevant technologies and an appropriate infrastructure and environment. The FinTech tree provides an overview.
ENABLERS
Figure 6
FinTech tree, Source: BIS-FSI
ACTIVITIES OF THE RESOLUTION AUTHORITY
In its function as the national resolution authority, the responsibilities of the FMA include ensuring the resolvability of banks domiciled in Liechtenstein and, if necessary, setting resolution measures. In doing so, it makes an important contribution to safeguarding financial market stability.
The legal basis for the FMA’s work as a resolution authority is the Law of 4 November 2016 on the Recovery and Resolution of Banks and Investment Firms (Recovery and Resolution Act; SAG). The SAG is the Liechtenstein transposition of the EU Bank Recovery and Resolution Directive (BRRD).
A key element of an effective resolution regime is the targeted preparation of banks for default scenarios. For this purpose, formal resolution plans are developed in cooperation with the undertakings. These plans contain not only analyses of the importance of the banks for the Liechtenstein financial centre, but also include specific crisis management strategies and resolution approaches. For large banks, this includes, for example, the implementation of debtequity swaps (“bail-in“; direct participation of creditors in the losses or capital cut) and merger & acquisition transactions, such as the sale of the shares of the crisis bank to interested buyers (“share deal“), the transfer of portfolios, or the establishment of a “bad bank“.
Resolution planning also includes an assessment of the resolvability of the company concerned and includes the identification and removal of potential impediments to resolution. To enhance the efficiency of the resolvability assessment, the FMA issued a guideline on the review of resolvability by auditors in 2023 (FMA Guideline 2023/2).
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In the resolution plans, the FMA also sets the level of the minimum requirement for own funds and eligible liabilities (MREL). The MREL must be high enough to ensure at all times that the expected losses to be borne by the company can be fully absorbed. The resolution unit must also be recapitalised to a sufficiently high level so as to fulfil the licensing conditions and continue to carry out its activities for a reasonable period of time. The FMA has published its strategy and approach for calibrating the MREL in its own national MREL policy (FMA Communication 2022/02). The policy was tailored to the Liechtenstein financial centre and increases both the transparency of the resolution authority’s actions and the legal certainty for the financial intermediaries.
In 2023, the FMA updated three group resolution plans for the systemically important banking groups and one group resolution plan for smaller financial intermediaries. In 2024, further resolution plans will be updated and expanded to ensure the operationalisation of resolution strategies in line with European standards.
The FMA is responsible for ensuring the resolvability of banks, making an important contribution to safeguarding financial market stability.
In addition, development of the Liechtenstein resolution financing mechanism was continued. The financial resources available under this mechanism are intended to support effective application of the resolution regime as needed. The resolution financing mechanism is to be endowed with adequate resources by the Liechtenstein banks on a pro rata basis according to a statutorily defined contribution key. In total, the banks have paid contributions of over CHF 31.6 million into the resolution financing mechanism so far. The pro rata contribution per institution is calculated by the FMA.
OUTLOOK
Thomas Stern, Head of Resolution Section
Based on the risk analysis, the FMA defined and published Its priorities of supervision in November.
Market developments, the interest rate environment, and high inflation remain the subject of the supervisory dialogue between the FMA and the supervised market participants. At the international level, financial stability risks remain high due to persistent inflation and weaker growth prospects. The turbulences in the US banking sector and the demise of Credit Suisse have shown that the stability of the financial sector cannot be taken for granted. Against this backdrop, the FMA is placing a particular focus on crisis prevention in the coming years by adequately addressing identified systemic risks.
Anti-money laundering continues to be a priority of supervision. In particular, the recommendations from the country assessment by MONEYVAL continue to be a focus. ESG risks and ICT security also remain supervisory priorities. Based on the risks identified, ESMA has also placed a focus on the risks associated with ESG disclosure and has included them as a Union Strategic Supervisory Priority (USSP). This priority will continue in 2024. Following an initial audit in 2023 to implement FMA Guideline 2021/3 on ICT security, the risk-based audit work of the audit offices will be continued. The audit reports will be used to further deepen the understanding of existing risks and measures.
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REGULATION PROGRESS REPORT
Developments in financial market regulation continue to be very dynamic. The FMA has been mandated by the Ministry of General Government Affairs and Finance to prepare an overview of possible options for redesigning the regulatory structure of the supervisory law applicable to banks and investment firms. The redesign of financial market law is due to be completed by 1 January 2025. At the EU level, the Digital Finance Package, which aims to regulate digital financial technologies, is also especially relevant for Liechtenstein. A key element of the package is the Markets in CryptoAssets Regulation.
REGULATORY DEVELOPMENTS
CONTINUE TO BE DYNAMIC
Liechtenstein implements international standards as a member of the European Economic Area (EEA). Liechtenstein’s financial market regulation is significantly influenced by the EEA-relevant financial market regulation of the European Union (EU). The regulatory activity of the European Union continued to be high in 2023.
The FMA was mandated by the Government to implement Directive (EU) 2019/2162 (Covered Bond Directive, CBD). The CBD regulates the requirements for the issue, structural features, public supervision, and publication obligations of covered bonds. The main aim is to develop well-functioning covered bond markets in the EEA, to protect investors, and to ensure the stability of the financial system. The Liechtenstein Parliament passed the implementing legislation for this purpose in March. The CBD was incorporated into the EEA Agreement, and the law on national implementation entered into force on 1 May 2023.
In consultation with the associations concerned, several adjustments and additions were made to FMA enactments in the area of due diligence (FMA Instruction 2018/7 and FMA Guideline 2013/1) during the reporting year. The adjustments mainly concern the following points: expansion of the yearly reporting obligation for the compliance officer, the group compliance officer, and the investigating officer; clarifications of various terms and interpretations and simplifications of the thresholds in the VASP sector with regard to the source of funds and source of wealth.
REGULATORY ACTIVITIES OF THE FMA
In accordance with the Owner’s Strategy, the FMA supports the Government in regulatory projects. For this purpose, a service agreement was concluded between the Government and the FMA. The FMA’s regulatory reporting listed 28 regulatory projects in the process of implementation at the end of 2023. Additionally, the FMA works to implement numerous regulatory and implementing technical standards of the European Union. Alongside drafting work in the legislative process, incorporation of the new legal bases into the supervisory processes is also necessary, some of which involves substantial effort. A selection of regulatory projects is described in the Annual Report.
REDESIGN OF THE LEGAL FRAMEWORK FOR THE SUPERVISION OF BANKS AND INVESTMENT FIRMS
The Banking Act (BankG) and the Asset Management Act (VVG) form the basis for the activities of banks and investment firms in Liechtenstein. Both enactments have been in force for several decades and also form the existing legal framework for the supervision of these financial intermediaries by the FMA.
The regulatory and systematic structure of the Banking Act can be traced back to the basic enactment of 1992, which was modelled in general on the Swiss Banking Act (chBankG). Since Liechtenstein’s accession to the European Economic Area (EEA), however, the current Banking Act has changed considerably. As a result of the transposition and implementation of relevant EEA legal acts, in particular the EEA legal basis for the prudential supervision of credit institutions and investment firms (CRD and CRR), the Banking Act has become increasingly extensive and has been supplemented
to include new subject matters. The regulatory and systematic structure of the Banking Act have not been adapted to those of EEA law, however, which has diminished the homogeneity of the Banking Act and made it increasingly complex for anyone applying the law.
The VVG was created in 2005 in part to give smaller financial service providers the opportunity to obtain an independent licence as an asset management company with the option of offering their services throughout the EEA by means of a “European passport“. The EEA legal basis for this was provided by the Markets in Financial Instruments Directive (MiFID and then MiFID II) and, to a limited extent, the CRD or CRR.
In 2019, the EU created a new prudential supervisory framework for investment firms as part of the implementation of the European Capital Markets Union Action Plan. This legal framework consists of the Regulation on the prudential requirements of investment firms (IFR) and the Directive on the prudential supervision of investment firms (IFD). With the creation of this independent supervisory regime for investment firms, a systematic separation was made at the level of EEA law between the prudential supervision of banks and of investment firms – a separation not reflected in the existing Banking Act.
The FMA was mandated by the Government in 2022 to comprehensively revise the legal framework for the supervision of banks and investment firms and to align the system of national laws with the regulatory system of EEA law (“Redesign of financial market law“). In future, the respective (sub-)areas of prudential supervision law applicable to banks and to investment firms are to be set out in separate, self-contained laws. The code of conduct to be observed when providing investment services and the supervision of business conduct are also to be governed by a separate law. In detail, the legislative package for the redesign of supervisory law for banks and investment firms comprises several measures:
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The Banking Act is being comprehensively revised. In terms of content, the new Banking Act will mainly comprise the transposition and implementation of the new EEA legal basis for prudential banking supervision. As part of this comprehensive revision, the basic terminology and concepts of the Banking Act (such as “deposit“, “credit“, “commercial activity“ or “bank“) will also be adapted to those of EEA law in order to take account of the ongoing harmonisation at the EEA level and to continue to ensure the access of Liechtenstein banks to the European single market.
The VVG is being amended to remove the provisions that previously transposed or implemented the CRD and CRR and to include the requirements of the IFD and IFR. In addition to the introduction of supervisory processes and tools specific to investment firms, the IFD/IFR package provides for numerous simplifications in particular for small and non-interconnected
The FMA was mandated by the Government to comprehensively revise the legal framework for the supervision of banks and investment firms.
investment firms (which includes asset management companies), from which the majority of currently licensed asset management companies will benefit.
The Investment Firms Act (WPFG) is being newly created to govern the licensing and organisational requirements for investment firms that are not asset management companies within the meaning of the Asset Management Act and the supervision of these investment firms by the FMA. The relevant provisions that previously served to transpose MiFID II are being transferred from the Banking Act to the WPFG. The WPFG also serves to transpose the IFD and implement the IFR.
A new Investment Services Act (WPDG) is also being created. The WPDG will include the code of conduct for banks and investment firms that must be complied with when providing investment services and/or investment activities and that is currently contained in the Banking Act and Banking Ordinance. The new WPDG will also govern the supervision of compliance with these requirements by the FMA.
The Trading Venues and Exchanges Act (HPBG) is the third new law, governing the operation of trading venues as well as trading techniques and data reporting services. The commencement of operations (in particular authorisation) of alternative trading venues (MTFs, OTFs, systematic internalisers) will be set out in the WPFG, while the commencement of operations of a regulated market (an exchange) and the authorisation of a data reporting services provider will be contained in the HPBG within the scope of the exemption under Article 2(3) of the Markets in Financial Instruments Regulation (MiFIR). These provisions are being transferred from the existing Banking Act and Banking Ordinance. In addition, the HPBG now contains specific requirements for the operation of an exchange, for exchange members and participants, and for the admission of financial instruments to trading on an exchange. The HPBG is
intended to form an essential supplement to the other existing capital market regulation in Liechtenstein.
The proposed revisions were in consultation until mid-August 2023 and are expected to be discussed in the June and November 2024 sessions of Parliament.
Peter Jedlicka, Senior Legal Specialist
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EUROPEAN REGULATION OF CRYPTO MARKETS
The constant evolution of the financial sector through the development of new technologies is leading to the emergence of new market participants, services, and business models. To further promote and utilise the potential of this digital transformation of the financial sector, while at the same time addressing potential risks and ensuring the protection of investors and financial markets, the European Union has adopted a comprehensive package of measures – the Digital Finance Package.
A key element of this package is the Markets in CryptoAssets Regulation (MiCAR). The main objective of this regulation is to create a harmonised regulation for crypto-assets within the EU, establishing a secure legal framework for crypto services providers.
MiCAR was published in the Official Journal of the European Union in June 2023 and entered into force within the EU on 29 June 2023. It will in general be applicable within the EU from 31 December 2024, although certain aspects (in particular the rules governing issuers of asset-referenced tokens and e-money tokens) will apply earlier.
The MiCAR is a directly applicable regulation that must be incorporated into the EEA Agreement. However, individual points (e.g. penal provisions, competences) must be transposed in an implementing act. The Liechtenstein timetable provides for this implementing act to enter into force on 1 February 2025, with a transitional period lasting until 31 December 2025. The consultation report was prepared in 2023 and has been circulated since the end of January 2024.
A project group at the FMA is working on implementation of MiCAR, including clarification of internal responsibilities and delegation of tasks to the
individual supervisory divisions. Approval and supervisory processes are also being created for institutions licensed under MiCAR. The numerous supplementary legal acts currently being drafted by the European Supervisory Authorities EBA and ESMA must be taken into account in this regard.
In preparation for MiCAR, amendments to the Law on Tokens and TT Service Providers (TVTG) entered into force on 1 February 2024. In particular, the existing TT service provider roles were aligned with MiCAR, and new roles introduced by MiCAR were included in the TVTG. The aim is to ensure that service providers
registered under the TVTG benefit from the transitional period once the MiCAR Implementation Act enters into force in Liechtenstein, i.e. that they can operate without MiCAR authorisation until then.
MiCAR is a key element of the European Union’s Digital Finance Package.
OUTLOOK
In July 2021, the European Commission presented a package to combat money laundering and terrorist financing (AML package). The legislative package will be published soon in the Official Journal of the EU. The AML package aims to eliminate the differing implementations of money laundering provisions within the EU/EEA. The AML package comprises four legislative acts: In addition to clarifications with regard to national supervisory authorities and financial intelligence units (FIUs), it provides for the cross-border networking of the registers of beneficial owners and enhanced cooperation between the competent authorities at the national and international level. Furthermore, the substantive requirements for combating money laundering and terrorist financing are now set out in a regulation. This means that the provisions do not need to be transposed into national law (“single rulebook“). In substantive terms, the scope of application is to be extended and the existing due diligence obligations further specified. In addition, a harmonised approach to identifying beneficial owners will be established and an upper limit for cash payments introduced. Finally, a new Anti-Money Laundering and Countering the Financing of Terrorism Authority (AMLA) will be created with the goal of better coordinating the activities of national supervisory authorities and developing uniform guidelines in the form of technical regulatory standards. The AMLA will have both direct and indirect supervisory powers, although numerous details are still open. The FMA will be significantly involved in the national implementation of the AML package.
The EU banking package was presented by the European Commission in 2021, is expected to be published soon in the Official Journal of the EU, and aims in particular to complete the implementation of the Basel III framework and strengthen the supervision of the banking system. The package consists of two legislative acts. The new rules aim to increase the
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resilience of banks in the EEA. In addition to implementation of the Basel III standards, the package also contains a series of measures to optimise the supervisory framework with regard to sustainability risks and branches from third countries. In addition, the supervisory authorities for banks in the EEA will be provided with better tools to carry out their tasks. Another key element of the banking package is the introduction of an output floor, which limits the capital benefit from the use of internal models. The FMA will play a key role in the national implementation of the banking package.
Liechtenstein’s financial market regulation is shaped significantly by the corresponding EU rules. The EU’s regulatory activity is expected to remain high.
With the enactment of Regulation (EU) 2022/2554 on digital operational resilience for the financial Sector (Digital Operational Resilience Act, DORA), uniform European rules have been created for the financial sector with regard to digital operational resilience.
DORA contains uniform requirements for the EEA for ICT risk management; the treatment, classification, and reporting of ICT-related incidents; the testing of digital operational resilience; the management of ICT third-party risk; and the exchange of information. DORA eliminates existing differences in national regulatory and supervisory approaches to ICT risks, which have been barriers to the functioning of the internal market. DORA is also intended to raise awareness of ICT risks and take account of the fact that the financial soundness of financial entities could be impaired by ICT incidents and a lack of operational resilience. In Liechtenstein, DORA applies directly following its incorporation into the EEA Agreement. However, some of the provisions of the regulation will be transposed in Liechtenstein through an implementing act. The Government adopted the consultation report on the implementing act at the beginning of 2024.
At the end of 2023, the Government adopted a consultation report on amendments to the Financial Market Authority Act (FMAG) and other laws. The enactment is intended to make various adjustments to the FMAG and address deficits in the FMA’s instruments that have arisen from supervisory practice and recent case law. The goal is to enable effective supervision and continue to ensure the credibility of the FMA as an equivalent supervisory authority in the European and global context. In particular, a dedicated legal basis for warning notices by the FMA will be created. At the same time, the introduction of a provision governing prohibition
from practising a profession in the FMA Act is intended to harmonise existing prohibitions set out in special laws and ensure comprehensive coverage of all areas of activity of the FMA. In addition, the FMA is to be granted a right of appeal against decisions of the FMA Complaints Commission and party status in proceedings before the Administrative Court.
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PROGRESS REPORT
EXTERNAL RELATIONS
The FMA maintains intensive contact with representatives of the private and public sector at both the national and international level. At the national level, the focus in 2023 was again on the exchange and transfer of knowledge concerning regulatory projects as well as current issues such as sustainability and cyber risks. The FMA hosts events on these topics. FMA representatives are also invited to financial industry events as experts or speakers. As a member of the most important European and international supervisory bodies, the FMA represents Liechtenstein’s interests at the global level. The FMA leadership visited Hong Kong and Singapore for work meetings and met with representatives of the public authorities and the markets. These encounters serve to convey knowledge about the Liechtenstein financial centre, to strengthen confidence in it, and to address the interests of Liechtenstein and Liechtenstein financial intermediaries.
WORK MEETINGS IN HONG KONG AND SINGAPORE
One of the FMA’s core tasks is to promote knowledge about the Liechtenstein financial centre and to strengthen confidence in it.
High-level representatives of the Financial Market Authority regularly visit international financial hubs to provide information about the domestic financial centre. Two such work meetings took place in Hong Kong and Singapore in the reporting year.
Hong Kong and Singapore are important locations for the Asia business of Liechtenstein financial intermediaries. Dr. Christian Batliner, Chairman of the Board of Directors, Mario Gassner, Chief Executive Officer, and Markus Meier, Member of the Executive Board and Head of the Banking Division, visited these financial hubs in October and exchanged views with representatives of the public authorities and the business community. Meetings included the Monetary Authority of Singapore (MAS), the Hong Kong Monetary Authority, and Swiss consulate and embassy representatives.
ANNUAL MEDIA CONFERENCE
Annual media conference no longer held in person
In 2022, the annual media conference was held in person for the first time since the Covid-19 pandemic had prevented it from being held in person in the two previous years. Due to transformations in the media sector and media use, however, interest in such in-person events has declined noticeably. The FMA accordingly decided against holding an annual media conference in the reporting year and instead provided information on the state of the financial sector with extensive materials on its website. Despite the challenging environment, the Liechtenstein financial
centre once again proved to be very stable and resilient in 2022. Chairman of the Board of Directors Dr. Christian Batliner and CEO Mario Gassner also emphasised the strategic importance of sustainability and cybersecurity for the financial centre. The FMA pays particularly close attention to these issues and strives to support financial market participants in this regard. By dispensing with an in-person annual media conference and by providing all information on its website, the FMA is attempting to meet the changing needs of media professionals. The FMA is of course always available to respond to enquiries by the media.
FACTS AND FIGURES ON OCCUPATIONAL RETIREMENT PROVISION
The FMA also supervises institutions for occupational retirement provision (pension schemes). Each autumn – including in the reporting year – the FMA publishes a report on developments in the second pillar of pension provision in Liechtenstein. 2022 was the worst investment year for pension schemes in the last ten years. The average investment return was – 12.5%. This was due to the war in Ukraine, rising inflation rates, and restrictive monetary policy. Fortunately, the provisional data for 2023 already showed a more positive picture again. The publication also deals specifically with the change in interest rate policy and its effects.
The figures at a glance
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FMA Annual Report 2023
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NATIONAL COOPERATION
The FMA maintains a close dialogue with professional and industry associations. In addition to regulatory developments, which are always a key discussion point with market and industry representatives, sustainability and cyber risks were major topics of discussion in the reporting year. During the reporting year, the FMA also regularly participated in or conducted events and workshops on these developments. In 2023, for example, workshops were held on the sustainable finance package and sustainability in insurance distribution.
FMA specialists also gave presentations at several information events and conferences. These are welcome opportunities for the FMA to provide financial market participants with first-hand information on supervisory or regulatory issues.
Relations with the Government and other authorities arise from supervisory activities, the preparation of regulatory projects on behalf of the Government, or the involvement of the FMA in international supervisory bodies. In addition, several bodies convene regularly, such as the Financial Stability Council, the Task Force on Restrictions on Liechtenstein Companies and Financial Centre Participants, and the Financial Stability Dialogue, in which representatives of the Government, the public authorities, and market participants exchange views. Discussions are also held between the Financial Market Authority and the Government on current topics as needed, such as in the reporting year on the redesign of financial market law.
WELCOME TO THE FMA
The FMA is an approachable authority and is available to its clients in a timely manner. During the reporting year, nearly 600 meetings with external clients were held on the premises of the FMA. This means the number of meetings increased again over the previous year (440), but is still not as high as before the pandemic. Most of the meetings continued to be conducted via videoconference. Feedback from clients indicates, however, that in-person meetings are still considered necessary and valuable.
BILATERAL COOPERATION
Cooperation with foreign partner authorities plays an important role in supervisory activities. Due to the worldwide activities of financial intermediaries, supervisory activities must be coordinated internationally. In 2023, the FMA chaired numerous colleges with national supervisory authorities of other countries and also participated in colleges organised by other supervisory authorities. The colleges were also increasingly held in the form of conference calls or videoconferences in 2023, despite the easing of the epidemiological situation. Supervisory cases also required cooperation with partner authorities. The four-country meeting of the supervisory authorities of the German-speaking countries is also of great importance. It took place in Bern in 2023, with key topics including European efforts to regulate the FinTech sector.
FINANCIAL STABILITY FORUM
How stable is the financial market in Liechtenstein? Where are the risks? What can be done about them? The FMA’s annual Financial Stability Report addresses these questions and more. The 2023 issue was presented to the broader public at the Financial Stability Forum in November. The Head of the Financial Stability Division, Dr. Martin Gaechter, presented the key findings of the report before a panel discussion with renowned experts analysed them in greater depth. Panellists included Cornelia Holthausen, Director of General Macroprudential Policy and Financial Stability of the European Central Bank (ECB), who also delivered the keynote of the evening.
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COOPERATION WITHIN THE
EUROPEAN
SYSTEM OF FINANCIAL SUPERVISION
The FMA is a member of the European System of Financial Supervision (ESFS). In this context, the FMA participates in numerous committees and working groups of the European Supervisory Authorities (ESAs) and the European Systemic Risk Board (ESRB) relevant for the Liechtenstein financial centre.
Gschind Triesenberg
FMA Annual Report 2023
EUROPEAN COOPERATION
The three ESAs – the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA) – ensure consistent and equivalent implementation and application of the regulatory framework for financial market supervision throughout Europe. For this purpose, the national financial supervisory authorities undergo regular peer reviews. In the reporting year, the FMA was involved in six peer reviews. Four of these were completed in 2023.
The FMA also received 76 questionnaires from the ESAs (previous year: 53). One of the aims of these questionnaires – some of which are very extensive – is to examine supervisory practice. They also serve to gather information about new risks and trends, to harmonise supervisory practice in the EEA countries, and to serve as a basis for regulation. The topics covered are very diverse. For example, the EBA asked about the application of distributed ledger technology in the Member States. Other important topics of the questionnaires in the reporting year included digitalisation, greenwashing, and the pensions market.
In the context of incorporation of new EU acts with EEA relevance into the EEA Agreement, the FMA represents Liechtenstein’s interests together with
Authority Peer review
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the Ministry of General Government Affairs and Finance and the EEA Coordination Unit. Coordination in this regard largely takes place in the relevant EFTA working groups.
TRANSFER OF KNOWLEDGE AND INFORMATION
The FMA strives to pass on its specialist knowledge to financial market participants and students and to create added value with this transfer. In the reporting year, numerous FMA employees gave presentations at public events. Priorities included regulatory topics in banking as well as new financial technologies. Employees also gave presentations at Compliance Day 2023, at workshops for auditors, and at information events of professional and industry associations. The FMA maintains close cooperation with the University of Liechtenstein and passes on knowledge to students and professionals in continuing training programmes. For this purpose, the FMA mainly teaches as part of master’s, bachelor’s, diploma, and certificate programmes at the University of Liechtenstein. FMA employees taught a total of 66 lessons.
ESRB Peer review on ESRB recommendation 2020/12
EIOPA Follow-up peer review on collaboration
ESRB Peer review on ESRB recommendation 2021/17
ESRB Peer review on ESRB recommendation 2015/2
EIOPA Follow-up peer review on application of IORPs and PPR
EIOPA Peer review on PPR
Table 9
Peer reviews
Outcome
Completed, fully implemented
Not completed by the end of 2023
Not completed by the end of 2023
Completed, fully implemented
Completed, implemented
Not completed by the end of 2023
GLOBAL COOPERATION
The FMA is a member of the most important international supervisory bodies, where it represents Liechtenstein interests. These include the International Organization of Securities Commissions (IOSCO), the International Association of Insurance Supervisors (IAIS), and the International Organisation of Pension Supervisors (IOPS). Liechtenstein is also a member of MONEYVAL, the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism. MONEYVAL is one of the nine FATF-style regional bodies (FSRBs) of the standard-setting Financial Action Task Force (FATF). MONEYVAL most recently evaluated Liechtenstein’s compliance with international AML standards in 2022 and gave Liechtenstein good marks.
OUTLOOK
The FMA leverages its international relations to strengthen the reputation and promote understanding of the financial centre. Particular importance is attached to strategic cooperation with partner and cooperation countries in support of Liechtenstein interests. As part of the public affairs strategy pursued by the FMA, a visit to Berlin in particular is planned for 2024.
At the national level, the FMA maintains relations with representatives of professional and industry associations and provides information about its supervisory activities at various events. At the international level, the FMA is represented in various bodies and cultivates exchanges with international organisations.
The FMA continues to cultivate its relationships with national institutions such as professional and industry associations and in various national and international bodies. At the international level, these include in particular the European System of Financial Supervision (ESFS), the European Banking Authority (EBA),
THE IMF VISITS THE FMA
At the end of May, Liechtenstein submitted its official application for membership to the International Monetary Fund (IMF). In November and December, a high-ranking delegation from the IMF visited Liechtenstein for the official membership mission. In addition to providing substantive assistance, the FMA also provided premises for the negotiations and accompanied the high-ranking delegation during its visit. The accession negotiations have progressed to the extent that the Liechtenstein Parliament is expected to consider and decide on accession before the summer of 2024.
the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA). Since the Covid-19 pandemic, meetings in both international and national contexts have increasingly been held virtually.
The IMF visits the FMA.
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PROGRESS REPORT
ENTERPRISE AND TEAM
The increasingly digital and virtual approach to work has become the new normal at the FMA. The freshly designed pilot zone for a “New Work“ office takes account of the these changed circumstances. At the same time, the new offices make the FMA even more attractive as an employer. The FMA’s second place in the Swiss Employer Award 2024 demonstrates this attractiveness. In order to communicate this to the outside world, the FMA has updated its employer web presence. The FMA offers junior professionals numerous opportunities for a successful career start.
MORE DIGITAL, MORE DIVERSE, MORE SUSTAINABLE
Even after the Covid-19 pandemic, the FMA has increasingly turned to digital and virtual working methods, which have now become the norm. The benefits of this way of working are still being utilised, and employees are in principle able to work from any location. They have access to the same digital working environment as in the FMA offices. With these opportunities, the FMA is also responding to current trends in human resources policy, such as the increased prevalence of new forms of work, the need for work-life balance, the advances of digitalisation, and the emergence of sharing models.
NEW WORK
In light of the changing world of work, the FMA has also redesigned part of its office space. This takes account of future forms of work.
The FMA has identified three main aims: further enhancing the employer brand, supporting digitalisation through human resources policy, and realigning management training. In 2023, the emphasis was in particular on the redesigned management training. These courses have been adapted to the new demands, with a focus on sustainable thinking and action, digital skills, and dealing with change. As multipliers, managers play a key role in the FMA’s digital transformation.
The effectiveness of the human resources strategy is regularly reviewed. At the beginning of 2024, the FMA was honoured with the Swiss Employer Award, taking second place in the medium-sized company category.
The gender diversity strategy set a target of 20 % women in management positions. The share rose from 15 % in 2018 to 19 % in 2023. At the end of 2023, there were 4 women and 17 men in management positions.
The availability of qualified specialists is of crucial importance for the FMA to be able to fulfil its mandate. It is therefore essential for the FMA to be an attractive employer and to take current trends in human resources policy into account. In 2015, the Board of Directors adopted a human resources strategy aimed at increasing the attractiveness of the FMA as an employer and ensuring the further development of the human resources policy. This policy was expanded in 2018 to include a gender diversity strategy so as to ensure the compatibility of family and career for women and men, irrespective of hierarchical level, and to increase the proportion of women in the management team. In December 2021, an updated version of the human resources strategy was adopted through 2028, focusing more strongly on factors such as sustainability and agility in human resources management.
The share of women in the FMA workforce has increased slightly in recent years, reaching 47 % at the end of 2023. According to the Employment Statistics, the share is 40 % for Liechtenstein as a whole.
9
The possibility of working part-time is a core element of the compatibility of family and career. Part-time positions are open to all employees, regardless of hierarchical level and function. At the end of 2023, 33 % of employees worked part-time, of which 78 % were women and 22 % men. Part-time work is also increasingly being taken up by men – also in management positions – albeit at a still relatively low level. According to the Employment Statistics, the share of part-time workers is 30 % for Liechtenstein as a whole.
The FMA is interested in the long-term loyalty of its employees. This factor is weighted accordingly in the design of working conditions and development opportunities. At the end of 2023, the employee turnover rate was at a low 3 %. In 2019, before the pandemic, this figure was nearly 10 %. Another indicator of employee satisfaction is the low absenteeism rate (illness, accident, maternity) of 2.1 % in 2023.
10
Share of employees with an employment level
to or lower than 90 %
Figure
Figure
Figure
Persons
Positions
Positions
Development of workforce and positions
Due to its high demand for specialists, the FMA is dependent on employees from abroad. By positioning itself as an attractive employer with modern working conditions, exciting and responsible work, and good development opportunities, the FMA strives to motivate as many Liechtenstein citizens as possible to apply. Training formats such as internships and a trainee programme also have the potential to attract Liechtensteiners for subsequent permanent employment. At the end of 2023, 32 % of employees were Liechtenstein citizens. At the end of 2015, this share was still 22 %. At the end of 2023, 10 interns were working at the FMA.
DEVELOPMENT OF THE WORKFORCE
In 2023, the average workforce was 123 (previous year: 119). At the end of December, the FMA employed 124 people (120). Five were employed on a temporary basis. The share of women was 47 % (45 %). 41 employees (36) worked part-time. Four employees (8) left the FMA during the reporting year, and five new employees joined the FMA (6). In total, 109.5 full-time equivalent positions (106.2) were filled at the end of 2023. The staffing plan approved by the Board of Directors provided for 111 full-time equivalent positions (108) at the end of 2023. The staffing plan calls for 115 full-time equivalent positions in 2024. Three of these positions are reserved for Junior Specialists as part of the trainee programme.
EDUCATIONAL BACKGROUND AND NATIONALITIES
Because of its complex and specialised areas of responsibility, the FMA has a very high share of employees with an academic background. 48 % of employees are lawyers, and 34 % are specialists such as auditors, banking experts, economists, and actuaries. 18 % of employees are officers or have a
Figure 13 Share of employees with Liechtenstein citizenship
Figure 12
ENTERPRISE AND TEAM
FMA Annual Report 2023
different educational background. IT specialists are becoming increasingly important.
FMA employees are largely from Liechtenstein and the surrounding countries of Switzerland, Austria, and Germany. 32 % of the employees are Liechtenstein citizens, 19 % Swiss citizens, 41 % Austrian citizens, 7 % German citizens, and 1 % citizens of other countries. In its recruitment, the FMA strives to encourage as many Liechtenstein citizens as possible to submit job applications.
BIKE TO WORK: HEALTHY AND SUSTAINABLE THROUGH THE MONTH OF JUNE
In June, a number of FMA employees took part in the “bike to work“ campaign, in which each team commuted to work by bicycle as often as possible. Apart from strengthening team spirit and fitness, the campaign also aimed to promote sustainable mobility. The five FMA teams covered 7,683 kilometres during the challenge, which is equivalent to the distance from Vaduz to Las Palmas de Gran Canaria and back. This saved 1,106 kilograms of CO 2 emissions. Marina, Martin, Andreas, and Mathias, representing the winning teams, were delighted to receive the vouchers from the Liechtenstein Hotel and Gastronomy Association at the prize ceremony. Noah (far right) presented the prizes.
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CORPORATE GOVERNANCE
Declaration on compliance with the Recommendations on the Governance and Control of Public Enterprises in Liechtenstein
The Board of Directors and the Executive Board of the FMA Liechtenstein confirm that the Recommendations on the Governance and Control of Public Enterprises in Liechtenstein, in the version of July 2012, have been complied with without exception.
GOVERNANCE, RISK & COMPLIANCE
The FMA has a governance, risk & compliance (GRC) system for the purpose of quality assurance and to prevent damage to its reputation, cases of official liability, or organisational failures. The integrated approach of the GRC system includes aspects such as risk management and the internal control system, information security, compliance, personal security, data protection, and operational and occupational safety, summarising the most important levels of action for corporate governance. The GRC system of the FMA is continuously being improved and adjusted.
In October of the reporting year, the GRC annual report was taken note of by the Executive Board and the Board of Directors. The report again confirmed that this integrated approach and the integrated risk management and control system of the FMA have proven their worth. The GRC annual report provides a comprehensive overview of all significant sub-aspects of the GRC system and of the activities and events during the reporting period.
Bofel above Forst, north of the Badtobelroefi Triesen
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FMA Annual Report 2023
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IN IRELAND FOR THE FMA
The FMA offers employees the opportunity to undertake secondments with foreign partner authorities. This is a great opportunity for young talent to gain international experience. At the same time, the FMA benefits from the experience gained and cultivates relationships with its partner authorities. Alexandra Bickel is a legal specialist at the FMA and completed a secondment at the Central Bank of Ireland from May to June.
What were your responsibilities at the Central Bank of Ireland?
I was part of a small team of five people in insurance supervision. My main responsibilities included supporting projects and working on supervisory cases within the team. I was involved in various projects and also had the opportunity to gain insights into different departments at the Central Bank.
Were our Irish counterparts welcoming?
Of course! I received an extremely warm welcome. Both my direct colleagues and staff from other teams took the time to introduce me to the work processes and corporate culture. There was an open and inviting
atmosphere, which made it easy for me to settle in quickly and work productively.
How did you like Dublin and Ireland apart from work?
During my free time, I explored the surrounding area, visited the sites, met up with work colleagues, and went on trips to neighbouring towns. I also took the opportunity to experience Dublin by day and night, since the city never sleeps. On the weekends, I went on longer trips to the west coast of Ireland and to Belfast and enjoyed the good, mostly sunny weather, which is very atypical for Ireland. I will especially remember the open and warm nature of the Irish people, who always made me feel welcome.
Were you able to gain anything for your work at the FMA?
Definitely. During my secondment, I received valuable insights into the workings of a large authority. The experience I gained, especially with regard to the processes and cooperation in an international environment, further developed my skills and understanding of regulatory matters, which has a positive impact on my work at the FMA. I also made valuable contacts that are useful for my work at the FMA.
What were the particular challenges, and what did you find difficult?
It took me some time to familiarise myself. The size and variety of the organisation were overwhelming at first, but with the support of my colleagues, I was able to successfully integrate into the work processes.
Would you recommend a secondment to your colleagues?
Absolutely. A secondment offers a unique opportunity to gain valuable insights into the workings of a large supervisory authority and at the same time get to know the culture in another country. The variety of experiences and the opportunity to develop both professionally and personally make a secondment a rewarding experience for anyone open to it.
FMA FUNDING
The FMA is funded by a contribution from the State, supervisory taxes and fees, and income from the provision of services.
In 2019, the Liechtenstein Parliament passed the proposal on amendment of the Financial Market Authority Act (FMAG), defining the State contribution for the years 2020 to 2023. The Principality of Liechtenstein contributed a maximum annual amount of CHF 5 million to FMA funding for the years 2020 to 2023. The effective contribution of the State for the year 2023 was CHF 5 million (2022: CHF 3.4 million). In 2023, the FMA imposed legally enforceable fines amounting to CHF 1.5 million. This amount is paid to the National Treasury.
2 x CHRISTMAS
On the initiative of its employees, the FMA had supported the Operation Christmas Child campaign in recent years. In 2023, the FMA decided to donate to 2 x Christmas, a campaign sponsored by the Swiss Red Cross (SRC). The 2 x Christmas campaign has been established for many years. While the original idea was to bring joy to children affected by poverty through gifts and to pass on unwanted presents after Christmas, the SRC no longer considers toys to be meaningful gifts. For this reason, only durable food and hygiene products are now given as gifts, since they can contribute to a real improvement in the living conditions of the recipients. People in Switzerland, Armenia, Bosnia and Herzegovina, Moldova, and Kyrgyzstan are supported. The preferred option is for the items to be bought locally. This saves transport costs and emissions and also supports the local economy.
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Because the statutory provision expired at the end of 2023, a further amendment to the FMA Act was required in the reporting year to update the State contribution, ensuring continued funding of the FMA from 2024. For this purpose, an overall evaluation of the FMA funding model was carried out, with the result that the FMA’s existing funding model has proven itself and enjoys broad acceptance among financial intermediaries, and a State contribution is called for given the lack of economies of scale and to ensure the sustained viability of the market. In its September session, the Liechtenstein Parliament decided to continue the proven system and to increase the maximum State contribution to CHF 6 million. The increase was necessary due to the growing scope of the FMA’s responsibilities (e.g. resolution regime for insurance undertakings, conduct of business supervision in the insurance sector, more intensive trading supervision in the Markets Division) and the lack of economies of scale, since otherwise the minimum reserves would likely no longer be met and the State would have been subject to a statutory obligation to make additional contributions.
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CHANGES AND PROMOTIONS
At its meeting on 2 May 2023, the Government appointed Dr. Gabriela Maria Payer, St. Moritz, as a regular Member of the Board of Directors of the FMA.
At its meeting on 28 November 2023, the Government appointed Arzu Tschuetscher, Ruggell, as a Member of the Board of Directors effective 1 January 2024. Michèle Borgeaud and Yvonne Lang-Ketterer stepped down from the Board of Directors. Volkmar Ritter, who already served as a member, was appointed Vice Chairman in 2023.
In September, the Board of Directors of the FMA appointed Simone Edelmann-Boeniger as a Member of the Executive Board and Head of the Anti-Money Laundering and DNFBP Division effective 1 March 2024.
Simone Edelmann-Boeniger succeeded Werner Meyer, who left the FMA at the end of February 2024 upon reaching regular retirement age.
The new member of the Executive Board, Simone Edelmann-Boeniger, has worked for the FMA for many years and is recognised in the financial centre as an expert in due diligence law and the supervision of professional trustees and auditors. Simone EdelmannBoeniger joined the FMA in 2009 and had headed the Supervision Section of the Anti-Money Laundering and DNFBP Division since 2013. Simone EdelmannBoeniger is from St. Gallen, Switzerland, and had previously held various roles at the FMA as well as at a court and in a law firm. Simone Edelmann-Boeniger studied law at the University of Zurich and holds an Executive MBA from the University of St. Gallen (HSG).
On 1 March 2024, Philipp Roeser took over as Head of the Supervision Section of the Anti-Money Laundering and DNFBP Division. Martina Tschanz was appointed Head of the Legal Section of the Insurance and Pension Funds Division effective 1 May 2024. Franz-Anton Steurer was appointed Deputy Head of the Asset Management and Markets Division effective
PODIUM POSITION
The Digital Economy Awards, a recognition for Swiss and Liechtenstein companies that demonstrate digital excellence, were presented in November. The FMA made it to the finals in the NPO & Government category and took second place – a valuable confirmation of the course the FMA has taken with its 2018 digital strategy.
1 July 2023, and Agnes Gehrer-Wachter was promoted to Head of the Legal Section in the Asset Management and Markets Division effective 1 November 2023.
OPPORTUNITIES FOR YOUNG TALENT
Professional training, trainee programme, internships, and secondments
The FMA relies on a broad spectrum of knowledge and competences of its employees to fulfil its responsibilities. The FMA accordingly attaches great importance to the development of employees and their basic and continuing training.
The FMA offers three training positions for commercial apprentices. The apprentices are employed with the Liechtenstein National Administration, and they work for a variety of public authorities and government offices over the course of their training.
The trainee programme guides young professionals through the various supervisory divisions of the FMA. They gain insight into supervisory activities, learn about how various topics interrelate, and benefit from the training effect. At the end of 2023, four positions were filled with young Liechtenstein professionals. Two trainees are simultaneously completing doctoral degrees.
FMA Annual Report 2023
The FMA offers internship opportunities for students and graduates. As of the end of 2023, 10 interns accounting for a total of 7.8 full-time positions (previous year: 8.5) were employed. These internships are generally in the legal or economic field, with a duration that generally ranges from six to 12 months. In addition, a total of eight holiday interns were employed in various areas for a period of one to three months. Secondments to foreign partner authorities are another opportunity to gain experience. The FMA benefits from the experience gained and at the same time cultivates relationships with its partner authorities.
Alexandra Bickel, a legal specialist at the FMA, gives personal insights into her secondment at the Central Bank of Ireland in an interview
OUTLOOK
The adoption of the human resources strategy for 2022 to 2028 laid the foundation for ensuring the attractiveness of the FMA as an employer. In 2024, the focus will be on evaluating the “New Work“ pilot zone. Employees from all organisational units can use the new office space and are encouraged to make suggestions. Their feedback will be incorporated into further planning.
Sustainability is also of great importance to the FMA, which adopted its sustainability strategy at the end of 2022. The goals of the sustainability strategy are climate neutrality of the FMA by 2035, avoidance of negative environmental impacts, sustainable human resources policy and management, and sustainable governance structures. Even though the FMA has long been engaged in sustainability, the efforts will be further intensified in 2024 and the first measures of the sustainability strategy implemented. The next steps in 2024 will be the introduction of e-charging stations and the purchase of FMA bicycles and FMA e-bikes. Just as important as the environmental dimension is the social component, which is manifested especially in human
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resources management, respectful and appreciative interaction within the team, good governance, and compatibility of family and career.
DIGITAL ECONOMY AWARD
Roger Guntli and Martin Schaedler at the award ceremony
SWISS EMPLOYER AWARD 2024
The FMA took second place in the Swiss Employer Award 2024. This means the FMA is recognised as one of the top employers in Switzerland and Liechtenstein. The Swiss Employer Award is the most representative award for determining employer attractiveness in Switzerland and Liechtenstein. The detailed assessments by a company’s employees determine who wins the award. The employee survey, in which over 42,000 participants from 153 companies in Switzerland and Liechtenstein took part, is the largest of its kind. In the “Medium-sized companies with 100 – 249 employees“ category, the FMA placed second among all participants.
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Waterfall Nendeln
ENTERPRISE AND TEAM
FMA Annual Report 2023
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FROM INTERNSHIP TO EXECUTIVE BOARD
In September, the Board of Directors of the FMA appointed Simone Edelmann-Boeniger as a member of the Executive Board and Head of the Anti-Money Laundering and DNFBP Division effective 1 March 2024. Simone succeeded Werner Meyer, who left the FMA at the end of February 2024 upon reaching regular retirement age
Simone is not only a recognised expert, but has also worked for the FMA for many years. She joined the FMA as an intern in 2009 – the ideal introduction to an FMA career.
An internship has a lot to offer Valuable experience, application of specialised knowledge, and relevance to practice. That is why the FMA gives students and young professionals the opportunity to gain initial insights into the world of financial market supervision. At the same time, this is an important contribution by the FMA to the training of professionals in the financial centre.
A successful career requires a lot more than a perfect introduction, of course. The FMA strives to offer the best framework for the long term. This includes:
– Development of employees, support for continuing training, and numerous opportunities to gain experience – for example with secondments to foreign partner authorities.
– Promotion of work-life balance and the opportunity to work part-time. Part-time positions are open to all employees, regardless of hierarchical level and function.
– Promotion of diversity: The gender diversity strategy has set a target of 20 % women in management positions.
– Fair pay – both between the sexes and with regard to family status and nationality. The FMA’s human resources strategy not only calls for ensuring equal pay, but also having it checked regularly by independent experts. This review also meets the request of the Liechtenstein Parliament for an external assessment of the wage situation. Most recently, the pay situation was checked for unexplained wage
differences between women and men in 2022 by the Competence Centre for Diversity & Inclusion (CCDI) of the University of St. Gallen. The result in brief: The pay analysis shows that neither women nor men are systematically discriminated against in terms of pay at the FMA – there is no statistically significant pay gap between the two sexes.
Of course, a career like Simone’s at the FMA also requires a bit of luck – especially since she almost decided against the FMA nearly 15 years ago. In the video interview, she explains why she ended up at the FMA after all and how her career has developed since then.
LEARN MORE Interview with Simone
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NEW EMPLOYER WEB PRESENCE FOR THE FMA
In August, the FMA’s new employer web presence went online, creating an independent platform for recruiting and employer branding. The new platform gives applicants comprehensive insights into the FMA’s culture and allows them to see whether the FMA’s values and goals match their own ideas and ambitions. In this way, the FMA is further positioning itself as an attractive employer and updating its presence on the labour market.
The FMA offers a wide range of career opportunities for specialists in numerous disciplines. Sufficient availability of qualified specialists is crucial to the FMA’s work. A convincing presence on the labour market is therefore equally important.
What is also special about the new employer web presence is that it uses no stock photos or symbolic images. FMA employees – i.e. the most convincing and authentic ambassadors for the FMA’s employer brand – made themselves available for all the images.
CODE OF CONDUCT FOR MAINTAINING HIGH QUALITY
On 29 November 2023, the Board of Directors adopted the FMA Code of Conduct. The Code of Conduct will apply from 1 January 2024 and aims to provide FMA employees with an additional instrument for ethical business conduct, setting standards for the FMA’s self-understanding of its daily work.
As a Code of Conduct, it contains specific principles of conduct intended to ensure that the employees of the FMA act in accordance with the values, culture, roles, and self-understanding of the FMA. It serves to safeguard the independence and integrity of the FMA and to maintain the high quality of work.
The Code of Conduct is divided into four sections: How we safeguard the independence of the FMA, How we ensure the integrity of our actions, How we handle information, and How we deal with the media. The principles include:
– Complying with all legal requirements, all external and internal regulations, instructions, and other provisions.
– Refraining from all actions that jeopardise the reputation and credibility of the FMA.
– Avoiding or disclosing conflicts of interest and even the appearance thereof.
– Strictly adhering to the principle of dual control in supervisory activities.
– Strictly avoiding any form of discrimination (e.g. based on gender, age, sexual orientation, religion, position in the company, origin, etc.).
– Striving for the sustainable use of resources.
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The FMA career site
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The Code of Conduct bundles principles of conduct that were largely already in place and is intended in particular to further strengthen awareness of compliance-relevant issues. In 2024, the Code of Conduct will be supplemented by a training programme.
DIGITAL EXCELLENCE AT ALL LEVELS
The FMA is an integral part of the digital financial ecosystem and actively strives to make a pragmatic contribution to the positive development thereof. The cornerstone for the FMA’s digital transformation was laid already in 2010 with the introduction of a comprehensive IT strategy. In 2018, a digital strategy was adopted with a time horizon until 2022. Accordingly, a new IT strategy for 2023 to 2026 was adopted in the reporting year. This strategy creates a solid planning and management basis for the FMA’s medium-term digital transformation. It provides for five digital aims.
Particular attention is paid to cybersecurity, so as to guarantee the data security and availability of the FMA’s IT systems at all times. For this purpose, the use of cloud services is also being considered, so that key business applications can be operated in the cloud as needed. In addition to technical development, the FMA attaches great importance to promoting a digital mindset and skills among employees. The aim is to promote digital affinity on a role-specific basis so that employees can make the best possible use of their creative leeway. The FMA also aims to make even more effective use of data analysis in its supervision in order to make an important contribution to protecting the financial market. The fifth digital aim provides for the FMA to shape its regulatory leeway in a technology-neutral manner.
One of the priorities in 2023 was the implementation of the E-Government Act. In 2020, the Liechtenstein Government and Parliament decided to make
DIGITAL AIMS
Cybersecurity : The FMA’s cybersecurity (data security, availability of systems in accordance with specifications) is guaranteed at all times thanks to good practice.
Workplace/cloud and digital mindset/skills: Employees are satisfied with the FMA’s IT infrastructure and make use of the possibilities it offers. Where appropriate, key business applications are operated in the cloud. Thanks to digital affinity and role-oriented skills, FMA employees use their creative leeway and work with their counterparts on an equal footing.
Process digitalisation and automation: Thanks to increased productivity, the FMA can focus on its core responsibilities and perform additional tasks without hiring additional employees.
Data analytics in supervision: The FMA protects the financial market efficiently with the effective use of digital tools to analyse the available data.
Technology-neutral design of the regulatory leeway: Technology-neutral regulation and interpretation of the law have become established.
electronic communication a mandatory standard for business transactions with public authorities. Electronic communication is intended to make public services more efficient and enable access to public services and information regardless of time and place. To implement this decision, a legal obligation was created for public authorities and private companies to communicate electronically in business transactions. The E-Government Act entered into force on 1 January 2023, requiring all public authorities to communicate electronically in business transactions with other public authorities and with companies. Public authorities are also obliged
ENTERPRISE AND TEAM
FMA Annual Report 2023
to communicate electronically with natural persons, provided they have consented to electronic communication. Exemptions exist for certain cases (e.g. bulk mailings of tax and fee invoices).
The FMA has already made numerous adjustments to enable fully electronic communication. For example, the FMA has a framework for fully digital file management, a digital official signature that replaces physical signatures, and a platform for incoming applications. The electronic communication channels will also be further expanded, including supplementing the application platform with a delivery platform and creating a secure, encrypted communication and data exchange room (trust room). The FMA will utilise synergies with the National Administration for this purpose.
With the increasing amount of data processed in its supervisory activities, the FMA has recognised the need for efficient, largely automated and error-free data processing. At the end of 2020, a data strategy was adopted to meet these challenges. While the handling of data previously relied heavily on manual processing, processes are being automated as part of the data strategy. Automation not only serves to increase efficiency, but also enables a cross-sector view of the market and the acquisition of new insights. The data strategy facilitates the transfer of expertise within the FMA and reduces dependence on individual employees.
The FMA has created an enterprise-wide data lake in which all supervisory data is centrally stored. This enables employees to generate individual visualisations, data clusters, and queries. By the end of 2023, more than 50 reports and more than 500 complex key figures were implemented in the big data cluster. Nine peripheral systems have also already been integrated as data sources.
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CYBERSECURITY: FOCUS ON THE HUMAN BEING
The risk of cyber attacks is growing. The advance of digitalisation is creating many new attack vectors. Supervisory authorities are also potential targets. In January 2024, for example, the Croatian Financial Services Supervisory Agency (HANFA) was affected by a cyber attack and was no longer reachable for some time. In this context, the FMA exchanged information with the security officers of the Office of Information Technology. For years, the FMA has attached great importance to high standards of IT security and, in particular, to the training of employees in this regard. Human beings are still considered to be the greatest weakness in a company’s IT security defence mechanism. The FMA has been conducting regular security awareness training on various topics for many years. In the reporting year, the FMA used the browser-based game “Cyber Crime Time“ for this purpose. In the game, employees take on the perspective of an attacker, gaining an awareness of the process and objectives of digital attacks.
Forest Schellenberg
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NEW, MORE COLLABORATIVE WAYS OF WORKING
In light of digitalisation and societal changes, the working world has been undergoing a major transformation for several years now. The FMA strives to offer its employees modern working conditions. The new concept has now been implemented in a pilot zone. Employees began using the redesigned offices in November. The offices accommodate future forms of work, ensuring the attractiveness of the FMA as an employer. The available space is used in an optimal way, designed so that employees enjoy working in this environment and are able to work efficiently. Collaborative and cross-divisional work is encouraged.
The project was developed with the involvement of experts. Employees were also involved from the outset. Employees are constantly included in this change process and can help shape it. Their feedback on the pilot zone will be taken into account as the project progresses.
FMA Annual Report 2023
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ORGANISATIONAL CHART OF THE FMA AS OF 31 DECEMBER 2023
BOARD OF DIRECTORS
Dr. Christian Batliner, Chairman
Volkmar Ritter, Vice Chairman
Yvonne Lang Ketterer
Juerg Meier
Dr. Gabriela Maria Payer
EXECUTIVE BOARD
Mario Gassner, CEO
Dr. Alexander Imhof, Deputy CEO
Dr. Reto Degen
Markus Meier
Werner Meyer
Martin Schaedler
Supervision Boris Blum Legal
Dr. Elena Seiser *
Dr. Martin Gaechter
Dr. Martin Gaechter
Dr. Thomas Stern
Degen
Steurer*
Agnes Gehrer-Wachter
Dr. Johannes Kueng
Daniel Gehri
GOVERNING BODIES OF THE FMA AS OF 31 DECEMBER 2023
Pursuant to Article 6 of the FMAG, the governing bodies of the FMA are:
a) the Board of Directors,
b) the Executive Board,
c) the Audit Office.
Board of Directors
Chairman
Dr. Christian Batliner, Triesen, elected 2020 – 2024 (Chairman 2022 – 2024)
Chief Executive Officer Mario Gassner, Triesenberg
Deputy CEO and Head of Insurance and Pension Funds Division
Dr. Alexander Imhof, Vaduz
Members Juerg Meier, Eschen, elected 2016 – 2020 and 2021 – 2025 Yvonne Lang Ketterer, Waedenswil (Switzerland), elected July 2021 – June 2026
Dr. Gabriela Maria Payer, St. Moritz (Switzerland), elected May 2023 – May 2028
Head of Banking Division Markus Meier, Buchs (Switzerland)
Head of Asset Management and Markets Division
Dr. Reto Degen, Rehetobel (Switzerland)
Head of Anti-Money Laundering and DNFBP Division Werner Meyer, Wettswil (Switzerland)
Head of Operations Division Martin Schaedler, Triesenberg
Applying Article 19(4) of the Financial Market Authority Act (FMAG), the Government transferred the function of Audit Office to the National Audit Office by its decision of 2 March 2010 (RA 2010/463). The responsibilities of the Audit Office are in principle governed by the specific provisions relating to the National Audit Office. The National Audit Office performs this function until the Government decides otherwise.
15
Governing bodies
Figure
Audit office
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ANNUAL REPORT AND FINANCIAL STATEMENT
Pursuant to Article 28 of the Financial Market Authority Act (FMAG), the FMA is funded by a State contribution, supervisory taxes and fees, and income from the provision of services.
ANNUAL REPORT
In its meeting of 29 November 2022, the Government approved the detailed 2023 FMA budget with a State contribution of CHF 5,000,000 and expenses of CHF 27,150,000. The actual expenses for the 2023 fiscal year were CHF 26,953,698, CHF 196,302 (0.7 %) below the approved budget.
Income without the State contribution amounted to CHF 21,956,099, CHF 996,099 (4.8 %) above budget.
Pursuant to Article 30b of the FMA Act, the FMA is required to set aside reserves each year, until the total reserves have reached 25 % of the average ordinary expenses over the past three years according to the financial statement. Under this legal requirement, the reserves for the year 2023 may not exceed CHF 6,416,505. After the allocation of the profit of CHF 2,400 to the reserves, the reserves amounted to CHF 6,174,354 as of 31 December 2023, CHF 242,151 below the maximum permissible reserves. The State contribution for 2023 therefore amounts to CHF 5,000,000.
Personnel expenses in the 2023 fiscal year amounted to CHF 19,336,454, CHF 8,546 (0.04 %) lower than budgeted.
At CHF 5,698,183, other operating expenses were CHF 36,817 (0.6 %) lower than budgeted. This was mainly due to lower than budgeted travel expenses, office expenses, and other expenses. Conversely, expert fees/opinions and premises in particular were higher than budgeted.
At CHF 1,918,905, depreciation expenses were CHF 151,095 (7.3 %) below budget. Depreciation expenses for software in particular were lower due to delays in IT projects as a result of resource bottlenecks at suppliers.
After the allocation of the profit for the 2023 fiscal year in the amount of CHF 2,400 to the reserves, the total reserves amounted to CHF 6,174,354 as of 31 December 2023.
Outlook
In its session on 7 September 2023, the Liechtenstein Parliament adopted the amendments to the Financial Market Authority Act (FMA funding: State contribution from 2024). Subject to Article 30b FMAG (reserve rules), the Principality of Liechtenstein will make an annual contribution to the FMA of a maximum of CHF 6,000,000 for the years 2024 to 2027. For the 2024 fiscal year, the Government has approved a budget with total expenses in the amount of CHF 28,740,000. Key topics in the 2024 fiscal year will include implementation of the new IT strategy and digitalisation of the FMA.
FMA Annual Report 2023
BALANCE SHEET AS OF 31 DECEMBER (IN CHF)
INCOME STATEMENT FROM 1 JANUARY – 31 DECEMBER (IN CHF)
Depreciation and value adjustments
Other operating expenses
Summary of income statement
FMA Annual Report 2023
NOTES ON THE FINANCIAL STATEMENT
Financial accounting principles
According to Article 32 FMAG, the supplementary provisions for specific company forms set out in the Law on Persons and Companies (PGR) apply to the preparation of the annual report including the financial statement. The FMA uses the provisions for large companies. These provisions demand that the financial statement give a true and fair view of the assets and liabilities, financial position, and profit or loss.
Balancing and valuation methods
Tangible assets are valued at acquisition cost reduced by depreciation. Depreciation is calculated using the straight-line method, based on the acquisition value. The depreciation policy provides for the following useful lives:
Cash and cash equivalents are stated at nominal value. Receivables are stated at nominal value, reduced by any required value adjustments. Provisions are to be calculated so as to take sufficient account of all identifiable risks in accordance with sound commercial judgement. Accounts payable are valued at their nominal value or at the repayment amount, whichever is higher.
Foreign exchange rate
The FMA invoices only in CHF. Accounts payable in currencies other than CHF are stated at the mean spot exchange rate on the balance sheet date.
Receivables
All receivables have a maturity of less than one year. They are stated in the balance sheet at nominal value. Value adjustments for risks identifiable on the balance sheet date are made to the extent necessary for business purposes. All value adjustments are reported under the item open receivables.
Table 1
Useful life
Fixed assets in CHF
The development of the individual fixed asset items is shown separately in the presentation of fixed assets:
Table 2 Presentation of fixed assets
Provisions
All provisions are reassessed each year, justified, and adjusted where necessary. The provisions include outstanding holiday entitlements as of 31 December 2023 in the amount of CHF 568,271.
Accounts payable
All accounts payable of the FMA have a maturity of less than one year.
Long-term liabilities
The FMA has a rental contract with the Liechtenstein Old Age and Survivors’ Insurance Authority concluded in December 2010, with a rental term of 20 years. The annual rent amounts to approximately CHF 1,800,000 (including ancillary costs).
Transactions with related companies and persons
Based on the Owner’s Strategy, a service agreement exists between the Liechtenstein National Administration and the FMA. Under this service agreement, the National Administration provides services for the benefit of the FMA, e.g. in the areas of salary administration and IT. The services provided are not invoiced, provided they are in line with the usual standards of the National Administration.
FMA Annual Report 2023
Board of Directors Government decision Term of office
Dr. Christian Batliner (Chairman)
BNR 2019/1388 of 22.10.2019
BNR 2021/1846 of 07.12.2021
Michèle Borgeaud (Vice Chair) – BNR 2016/1674 of 16.11.2016 – BNR 2021/1846 of 07.12.2021
Volkmar Ritter (Vice Chairman) – BNR 2022/497 of 29.03.2022
Juerg Meier – BNR 2015/1727 of 16.12.2015 – BNR 2020/1403 of 29.09.2020
Yvonne Lang Ketterer – BNR 2021/937 of 15.06.2021
Dr. Gabriela Maria Payer – BNR 2023/757 of 02.05.2023
Table 3 Board of Directors
Remuneration of the Board of Directors and Members of the Executive Board (Article 1092(9)(a) PGR)
a) Board of Directors
Remuneration for the Board of Directors of the FMA in the 2023 fiscal year, including social security contributions, was CHF 475,021 (previous year: CHF 464,214). Of this amount, social security taxes and expenses for retirement provision and related benefits amounted to CHF 52,521 (of which CHF 48,894 for retirement provisions). The composition of the Board of Directors in 2023 was as shown in Table 3. The remuneration of the Members of the Board of Directors is based on the Government decision of 31 January 2017 (BNR 2017/101) and of 14 December 2021 (BNR 2021/1897). The Government specified the following remuneration:
– Basic compensation for the Chairman
– Basic compensation for the Vice Chairman
– Basic compensation for other members
– Flat-rate compensation per meeting day
b) Executive Board
01.01.2020 – 31.12.2024 01.01.2022 – 31.12.2024
01.01.2017 – 31.12.2021 01.01.2022 – 30.06.2023
01.04.2022 – 31.03.2027
01.01.2016 – 31.12.2020 01.01.2021 – 31.12.2025
01.07.2021 – 31.12.2023
01.07.2023 – 30.06.2028
The gross remuneration of the Members of the Executive Board in the 2023 fiscal year was CHF 1,963,667 (previous year: CHF 1,994,600) without social security contributions.
The Members of the Executive Board are appointed by the Board of Directors. The Executive Board was composed of the following Members as of 31 December 2023: –
Mario Gassner, Chief Executive Officer
– Dr. Alexander Imhof, Deputy CEO and Head of Insurance and Pension Funds Division
– Dr. Reto Degen, Head of Asset Management and Markets Division
– Markus Meier, Head of Banking Division
Werner Meyer, Head of Anti-Money Laundering and DNFBP Division – Martin Schaedler, Head of Operations Division
Workforce
In 2023, the average workforce was 123 (previous year: 119). At the end of December 2023, the FMA employed 124 people (120). Five were employed on a temporary basis. The share of women was 47 % (45 %). 41 employees (36) worked part-time. Four employees (8) left the FMA during the reporting year, and five new employees joined the FMA (6).
In total, 109.5 full-time equivalent positions (previous year: 106.2) were filled at the end of 2023. The staffing plan approved by the Board of Directors provided for 111 full-time equivalent positions (108) at the end of 2023.
Audit firms/Reimbursements for audit firms
The audit firms item in the amount of CHF 131,394 includes expenses in connection with extraordinary on-site inspections and examinations carried out by external audit firms. In return, these costs were invoiced to the financial intermediaries under the reimbursements for audit firm item in the amount of CHF 131,394.
Official liability claims
In March 2023, the FMA was served by the Court of Appeal with two substantively related actions against the FMA (see events after the balance sheet date in the 2022 annual financial statement). In one case, the action was dismissed in its entirety; in the other case, the action was declared withdrawn due to the
non-payment of the security deposit. Accordingly, in neither of the cases did this result in liability for the FMA.
Events after the balance sheet date
In January 2024, the FMA was served with a lawsuit before the Court of Appeal under the Official Liability Act. From today’s perspective, this lawsuit has no impact on the 2023 financial statement.
FMA Annual Report 2023
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ATTESTATION OF THE AUDIT OFFICE
ONE COUNTRY. ONE TRAIL.
On the Liechtenstein Trail, 75 kilometres of exciting stories, sights, majestic views, idyllic spots to have a rest, and much more await the explorer. The Liechtenstein Trail, which leads through all 11 municipalities of the country, is best completed in several day stages. We would like to thank Liechtenstein Marketing for providing the photos.
Inland Canal by the Auweg Vaduz
Publisher and Editor
Financial Market Authority
Liechtenstein Landstrasse 109a PO Box 279
9490 Vaduz, Liechtenstein
Telephone +423 236 73 73
info@fma-li.li www.fma-li.li
Concept and Design Leone Ming Est.
Photography Roland Korner, Close up (Foreword portraits) Liechtenstein Marketing (Trails) zVg
The Annual Report is available in German and English on the FMA website. No printed version is published.
