Switzerland

Details

  • Service: Financial Services, Regulatory Services
  • Type: Business and industry issue
  • Date: 11/21/2013

Remuneration Schemes 

The new FINMA Circular 10/1 “Remuneration Schemes” defines minimum standards for the design, implementation and disclosure of remuneration schemes for financial institutions. The circular aims to effectively control compensation practices within the financial sector. Remuneration schemes should not serve to incite the taking of inappropriate risks and thus should not possibly impact the stability of financial institutions.
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Scope of the circular:

 

The circular applies to financial institutions regulated by the following laws:
 
  • Banking Act (BA)
  • Insurance Supervision Act (ISA)
  • Stock Exchange Act (SESTA)
  • Collective Investment Schemes Act (CISA)

 

Large banks and insurers: 
 

Implementation is mandatory for large banks and insurers. The scope is determined by threshold values based upon
 
  • the required equity capital for banks, and
  • the required solvency for insurers.

 

    The threshold value is set at two billion francs (the required equity capital and solvency).

     

     
    Small and medium-sized institutions:

     

    For these institutions, the principles of the circular represent guidelines that should be followed during establishment of their remuneration policy.

     

    FINMA

     

    • will incorporate the remuneration policy into its risk-based supervisory
    • process,
    • reserves the right to subject individual institutions to the circular regardless
    • of the threshold value.

     

    FINMA will exercise this right on the basis of the risk profile or due to irregularities and inappropriate remuneration practices.

     

     

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    Recent economic developments have brought about significant changes, especially in the financial services sector.