In this episode, we discuss the new conception of the financial market law in Liechtenstein. The main goals of the reform are to enhance the efficiency of financial market supervision, align with EU and EEA regulations, and improve the stability and integrity of the financial system. A key feature is the separation of prudential supervision (focused on the financial stability of banks and securities firms) from conduct-of-business supervision (focused on market integrity and investor protection). The new framework includes separate regulations for banks, securities firms, trading infrastructures, and markets.
Introdcution
Ilario Monti: Welcome to our Liechtenstein Financial Services Podcast. In the Liechtenstein Financial Services Podcast, we will primarily explore the legal, regulatory, and tax perspectives of banks, funds, asset managers, and other participants in the Liechtenstein financial center. A production of PwC Liechtenstein.
Today, we are discussing the redesign of the financial market law in Liechtenstein.
I am Ilario Monti your host, with 11 years of experience at PwC, specializing in auditing and consulting for banks and other financial service institutions.
With this podcast, we aim to provide a concise overview of the current developments. Our podcast today focuses on the opportunities and challenges arising from the redesign of the financial market law in Liechtenstein.
Joining us today is Philipp Rosenauer, Partner at PwC and an esteemed expert in the legal field. Welcome, Philipp!
Philipp Rosenauer: Thank you, Ilario! It’s great to be here and talk about this important topic.
S1: Philipp, can you tell us a bit about yourself and your connection to Liechtenstein?
S2: tbc
Redesign of the financial market law
IM: Thank you, Philipp. Let’s start with the discussion about the redesign of the financial market law. Could you explain the main goals behind the redesign of financial market law in Liechtenstein and what prompted the government to initiate this reform?
PR: Certainly. The primary goals of the redesign are to enhance the efficiency and effectiveness of financial market supervision, ensure better alignment with EU and EEA regulations, and improve the overall stability and integrity of the financial system. The government initiated this reform to address the evolving complexities of financial markets, technological advancements, and the need for a more specialized and focused regulatory framework. By separating prudential supervision from conduct-of-business supervision, the aim is to create a more transparent, efficient, and resilient financial regulatory environment.
IM: That sounds like a significant change. How does the new regulatory structure differ from the current one, especially in terms of the separation between prudential supervision and conduct-of-business supervision?
PR: The new regulatory structure introduces a clear separation between prudential supervision, which focuses on the financial stability and soundness of banks and securities firms, and conduct-of-business supervision, which aims to protect investors and ensure market integrity. Under the new framework, prudential rules for banks will remain in the Banking Act (BankG), while prudential rules for certain classes of securities firms will be housed in a new Securities Firms Act. Conduct-of-business rules for both banks and securities firms will be centralized in a new Securities Services Act. Additionally, regulations for trading infrastructures and markets will be consolidated into a separate Markets Act. This separation allows for more specialized oversight and reduces potential conflicts of interest.
IM: That sounds like a very detailed and structured approach. What are the key challenges in implementing these changes, and how will they impact the market participants, especially banks and securities firms?
PR: Implementing these changes involves several challenges, including the need for extensive coordination among regulatory bodies, updating existing legal frameworks, and ensuring that market participants are adequately prepared for the transition. For banks and securities firms, the impact will be significant as they will need to adapt to new regulatory requirements and possibly restructure their compliance processes. However, the long-term benefits include a more transparent and predictable regulatory environment, which can enhance their operational efficiency and competitiveness.
IM: The reform aims to align Liechtenstein's regulations with EU and EEA law. What specific European regulations are being incorporated, and how will this affect the country's financial sector?
PR: The reform incorporates several key European regulations, including the Capital Requirements Directive (CRD IV/V) and the Capital Requirements Regulation (CRR/CRR II) for banks, as well as the Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR) for securities firms. By aligning with these regulations, Liechtenstein ensures that its financial sector remains integrated with the broader European market, facilitating cross-border operations and enhancing the attractiveness of Liechtenstein as a financial hub. This alignment also helps in maintaining high standards of financial stability and investor protection.
IM: Thank you, Philipp, for this detailed information. Could you walk us through the timeline? What milestones should we expect leading up to the final implementation in 2025?
PR: The timeline for the reform is structured to ensure a smooth transition. Key milestones include:
2020: Government decision to initiate the reform and establish a project group within the Financial Market Authority (FMA).
2021-2022: Drafting of new legislation and consultation with stakeholders.
2023: Parliamentary approval of the new laws and initial implementation phase.
2024: Full-scale implementation and transition support for market participants.
January 1, 2025: Final implementation and enforcement of the new regulatory framework.
Throughout this period, the FMA will provide guidance and support to ensure that all stakeholders are well-prepared for the changes.
IM: And how will the new laws help to strengthen the competitiveness of Liechtenstein's financial sector, and what does this mean for businesses operating within it?
PR: The new laws are designed to create a more robust and transparent regulatory environment, which can enhance investor confidence and attract more business to Liechtenstein. By aligning with EU and EEA standards, the financial sector in Liechtenstein will be better positioned to compete on an international level. For businesses operating within the country, this means greater access to European markets, improved regulatory clarity, and a more stable financial environment. Ultimately, these changes are expected to foster innovation, growth, and long-term sustainability in the financial sector.
Summary
IM: Thank you, Philipp, for these insightful explanations. It's clear that the redesign of financial market law in Liechtenstein is a comprehensive and forward-looking initiative. We look forward to seeing how these changes unfold in practice.
PR: Thank you, Ilario. It was a pleasure to discuss this important topic.
IM: From this basis, we will dive into new topics such as legal, regulatory or other topics in future episodes. So stay tuned for our upcoming episodes.
In the meantime, contact us for a personal exchange how Liechtenstein can fit into your agenda.