A COVID-19 Regulatory Guide for Financial Institutions in Europe

Switzerland

News / Switzerland 650 Views 0

A COVID-19 Regulatory Guide for Financial Institutions in Europe

Switzerland

News / Switzerland 650 Views 0

Amid the COVID-19 pandemic, regulators across Europe have put in place various measures to ensure continuity and sustainability of the financial sector.

In a new guide released earlier this month, international law firm Baker McKenzie provides information on key policies and risk areas financial institutions should watch out in jurisdictions affected by COVID-19, including Switzerland, Germany and France.

In Switzerland, the paper notes that Swiss Confederation, the Swiss National Bank (SNB) and the financial regulator, the Swiss Financial Market Supervisory Authority (FINMA), have been proactively monitoring the evolving situation and taken various measures to reduce the consequences of the pandemic.

Some of the key measures and initiatives launched so far include regulatory reliefs and temporary exemptions to firms as well as supervised institutions by FINMA, as well as a loan program for Swiss small and medium-sized enterprises (SMEs) intended at ensuring that companies facing liquidity problems resulting from COVID-19 have access to bridging loans, it notes.

With more than 31,200 confirmed cases and over 1,950 deaths, as of June 22, Switzerland has been one of the hardest hit countries in Europe. On March 16, the Federal Council declared a national state of emergency, closing all shops, restaurants, bars and entertainment facilities and schools, prohibiting public gatherings of five people or more, and recommending that all citizens stay home.

The pandemic and restrictions put in place to limit the spread of the virus have put a serious toll on the economy. Switzerland’s gross domestic product (GDP) is expected to contract by around 6% this year in one of the strongest declines since the oil crisis in the 1970s, the SNB said on June 18. For the year as a whole, the State Secretariat for Economic Affairs (SECO) forecasts unemployment to hit 3.8% year-on-year, compared with 2.3% in 2019.

To help whether the COVID-19 storm, the government has introduced support packages, as well as monetary and macro-financial policies to address liquidity bottlenecks.

In this uncertain, rapidly changing landscape, the Baker McKenzie guide recommends financial institutions in Switzerland to monitor closely the announcement of any new governmental or regulatory policy that could lead to changes in the applicable law, the options for relief as well as the assessment of compensation and loans.

It’s also critical for financial institutions to make sure that in the case of remote work, company data are protected in a suitable manner, and that all employees receive instructions on how to handle company data appropriately, the guide says.

Referring to FINMA’s latest press releases, the document notes that despite the current crisis induced by the pandemic, financial institutions and financial market infrastructures have continued to work well at an operational level, and their services have remained available and unbroken, thanks to effective remote working methods.

It was also found that Swiss financial institutions and insurance companies handled the market turbulences aptly since they were well prepared financially and were equipped to deal with extreme stress scenarios.

In Germany, banks and financial services firms have extensive risk management obligations, but given the current circumstances, banks have been permitted to dispense with liquidity buffer requirements. Operational rules related at the general prohibition of “out of office trading” have also been relaxed, and more flexibility for the prudential treatment of loans backed by public support measures has been granted, the guide notes.

In Austria, the government has set up a EUR 38 billion support fund by establishing a financing company, called COVID-19 Finanzierungsagentur des Bundes, that has been tasked with the handling of financial aid packages consisting of emergency aid for hard-hit sectors, guarantees and warranties for current loans of affected companies, as well as tax deferrals.

In France, authorities have taken several measures touching up short selling, transparency, as well as the continuity of business for financial institutions in times of crisis. The government has also introduced State-guaranteed loans to make it easier for credit institutions and financial companies to grant loans to companies, the guides says.

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