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Banking regulators call for tighter surveillance

Swiss banks may soon face tougher measures against bad practice Keystone

The Swiss Federal Banking Commission has called for tougher surveillance and stricter measures to deal with abuse in the financial sector, including insider trading.

This content was published on May 2, 2003 - 15:14

It says existing laws governing financial dealings are outdated, too complicated and incomplete.

In a bid to modernise the existing system, the government in 2001 commissioned a panel of experts to assess the existing system of sanctions and to draw up a set of suggested amendments.

The Commission has now proposed to that panel the creation of a set of new sanctions and procedures for investigating and disciplining institutions found to be in breach of financial law.

It wants to open up a discussion among expert commissions on its proposals. It is not yet clear when any new laws would be introduced.

Initial responses from the banking industry to the proposals showed agreement that changes were needed.

As James Nason, spokesman for the Swiss Bankers Association, explained, the main shortcoming of existing legislation is that it does not deal with the latest banking issues.

“What no-one doubts is that any modern, international financial centre today really needs a sophisticated system of effective sanctions,” he told swissinfo.

“With the rise of internet banking or the phenomenon of dictators depositing their money in banks, legislation has to be brought up to date to keep up with these trends.”

Tough sanctions

Under the Commission's proposals, sanctions of up to several million francs could be imposed on both businesses and individuals.

It also proposed that financial gains obtained illegally be confiscated and the activities of an establishment under investigation be suspended or halted definitively.

The Commission said the current laws were too focused on the two extremes of either taking away a bank's licence or simply giving it a verbal reprimand. It therefore called for a more sophisticated system, bringing in greater variety of punishments.

Other proposals included a simplified procedure, with a new independent sanctions panel elected by the Commission given responsibility for imposing penalties.

But, Nason says, it should be remembered that in comparison to other countries Switzerland's banking centre is already subject to tough restrictions.

"The Commission has the ultimate sanction - it can close a bank down."

The Commission also has the power to "name and shame" banks in breach of the law, unlike its British counterpart, for example.

The Commission's proposals come amid new moves to clamp down on money laundering in Switzerland.

New regulations include guidelines to identify so-called "higher-risk business relationships".

Money laundering is a key concern for Swiss authorities, and a number of high-profile cases have brought unwanted attention to the country's banking laws.

Upbeat market

Despite the Commission's criticism of current sanctions, its assessment of the sector's performance during 2002 was positive overall.

In its annual report, the supervisory body said Swiss banks had maintained stability despite the industry's aggregate net profit sinking to a five-year low of SFr9.34 billion ($6.95 billion).

As Nason explains, the banking sector has kept its head above water because it is operating from a strong base.

"The ultimate pillars of strength of the Swiss financial centre are there, which is basically stability, competence and know how," he said.

swissinfo, Joanne Shields and Faryal Mirza

Key facts

In 2001 the government commissioned a panel of financial experts to assess the surveillance framework for the financial sector and suggest amendments.
The Swiss Banking Commission proposed tougher sanctions and surveillance measures, based on the panel's findings.
The Commission also proposed simpler procedures and an independent sanctions panel.
The Commission's 2002 report on the banking sector showed all of Switzerland's banks had maintained stability despite the economic downturn.

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