On September 23 1998, the High Chamber of the Swiss parliament enacted a modification of the Federal Banking Statute regarding the supervision of foreign banks' subsidiaries and/or branches (hereinafter referred to as 'subsidiaries') in Switzerland by foreign authorities as well as the supervision of foreign subsidiaries of Swiss banks by the Swiss Federal Banking Commission ('SFBC'). This modification was adopted by parliament on April 22 1999 and shall enter into force on October 1 1999.
Even if the informal discussions between a foreign authority and a Swiss subsidiary of a foreign bank were already tolerated by the Swiss Federal Banking Commission, there was no legal provision to authorize a foreign authority to officially collect directly information in Switzerland in order to supervise a foreign bank.
According to the new modification of the Federal Banking Statute of April 22 1999, the SFBC may now authorize foreign supervisory authorities to collect information directly from foreign banks' subsidiaries in Switzerland if these authorities comply with the following conditions :
- Only the authorities of the state in which the foreign bank is registered are authorized to supervise directly a subsidiary of such bank in Switzerland. These authorities may also delegate the supervision to an auditor. In any case, the direct supervision is subject to an authorization, to be delivered by the SFBC, which will be refused if the state concerned does not allow the SFBC to operate a similar supervision in return.
- The foreign authorities must be bound by professional or official secrecy.
- The information collected in Switzerland by foreign authorities may only be used in order to assure a consolidated supervision of the banking activities. This means that the foreign authorities may only obtain information necessary to such a consolidated supervision, in particular concerning the group's adequate organization, the risk controls, the irreproachable activity of the subsidiary's executives and the obligation to report to the supervision authorities. Therefore, no information directly or indirectly related to private banking clients of the subsidiary should normally be collected in Switzerland by the foreign authorities, maybe with the exception of information objectively necessary to ascertain the large risks if any (one obligor principle). In case of doubt, the SFBC shall decide.
- The foreign authority which is authorized to collect information directly in Switzerland is not allowed to transmit this information to other authorities without the prior consent of the SFBC. As far as a transmission to criminal authorities is concerned, the SFBC shall only authorize such a transmission if it were to be authorized according to the ordinary rules and regulations of the international judicial assistance in criminal matters. Such an authorization is excluded if the foreign criminal authorities intend to proceed because of a tax offence, a political offence, or if the procedure does not comply with the general principles of the defendant's rights.
For further information on this topic please contact Guy-Philippe Rubeli, Thomas Keller or Robert Furter at Pestalozzi Lachenal Patry by telephone (+41 22 809 45 00 ) or by fax (+41 22 809 45 01 ) or by e-mail ([email protected], [email protected], or [email protected]).
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