Deposit and investor protection
After the financial crisis the most important industrialized countries and emerging economies agreed on reforms to increase the stability of the financial system. For example, the new Basel III directives on equity structuring have to be transposed into national law by 1 January 2013. The Liechtensteinische Landesbank has already widely implemented these Basel capital and liquidity directives.
Efforts by the European Union have a direct impact on the EEA member state Liechtenstein. Investor and consumer protection is important for private banking and the private client business. Bank deposits and investments in Liechtenstein are protected by the Deposit Guarantee and Investor Protection Foundation (Einlagensicherungs- und Anlegerschutz-Stiftung) of the Liechtenstein Bankers Association (LBA). Accordingly, private client deposits of up to a maximum of CHF 100'000.– are guaranteed. Additionally, LLB is the only Liechtenstein bank with a state guarantee on savings deposits and medium-term notes. The guarantee is anchored in Art. 5 of the Law of 21 October 1992 concerning the Liechtensteinische Landesbank.
Furthermore, the legal situation in Liechtenstein conforms to the international regulatory requirements of the EU, which aim to improve the integrity and transparency of the financial system as well as investor protection in the European financial market. The financial centre Liechtenstein implemented the Markets in Financial Instruments Directive (MiFID) on 1 November 2007. The EU Commission has meanwhile been working on proposals for a more far-reaching regulation of financial markets and investment services. MiFID II is part of a comprehensive European regulation agenda in the financial sector. This also includes proposed regulations on market infrastructure and market activities: the European Market Infrastructure Regulation (EMIR) and the Market Abuse Regulation (MAR). The Liechtensteinische Landesbank is closely monitoring this development.
Improvements for EU funds
As one of Liechtenstein's largest fund providers, the LLB Group continually monitors the competitive situation in Europe. The law on undertakings for collective investments in securities (UCITSG; UCITS: Undertakings for Collective Investment in Transferable Securities) and the concomitant provision, which contain new regulations governing the distribution of funds in the EU, have been in force since 1 August 2011. The law improves investor protection, reduces administrative barriers and increases the efficiency of cross-border sales. Fund providers profit from an accelerated time to market, substantially shorter approval deadlines and a standardized approval process. Furthermore, the EU passport enables management companies to operate funds in the whole European Economic Area (EEA) without having to establish branch offices in individual countries.
LLB Fund Services AG can also manage and market funds that are subject to the law of another member state of the EU/EEA in a simplified notification procedure. The simplified prospectus is being replaced by a Key Investor Information Document (KIID). As early as 2012, the EU will probably pass new regulations relating to the rights and obligations of custodian banks as part of the UCITS V directive.
The Alternative Investment Fund Managers (AIFM) directive will have to be transformed into national law by July 2013. The aim of the directive is, inter alia, the regimentation of private equity funds and hedge funds, and also of non-harmonized funds, i.e. non-UCITS funds, which are aimed at professional investors, institutional investors and wealthy private persons. Management companies of non-UCITS funds will have to comply with stricter requirements for risk management and compliance. UCITS-IV-conform management companies already meet high organizational requirements. The adjustments will probably not prove to be problematic.
New FATF recommendations
In February 2012, the Financial Action Task Force (FATF) reformulated some of its recommendations on combatting money laundering and the financing of terrorism (40 recommendations plus 9 special recommendations). One item is: serious tax offences will in future be considered predicate offences for money laundering. This means that in cases of reasonable suspicion financial intermediaries are obliged to report these to the national money laundering reporting office. In the second half of 2012, Liechtenstein will undergo a country assessment by Moneyval, the Committee of Experts of the Council of Europe. As part of this assessment, experts of the International Monetary Fund (IMF) will review the implementation of the FATF recommendations.