FRSGlobal : Risk Analysis and Regulatory Reporting

Regulators in Liechtenstein

Liechtenstein has one regulatory body for the financial industry:

• Financial Market Authority Liechtenstein (FMA)

FRSGlobal in Liechtenstein

In comparison with many other countries, Liechtenstein’s financial institutions have survived the global financial crisis quite well. Banks have remained stable and no financial institution has had to rely on government support.

The Financial Market Authority Liechtenstein (FMA) has been active in the financial crisis and has contributed to the stability of the Liechtenstein financial market by adopting a series of measures. Risks have been actively controlled by initiating accurate investigations and intensified market research, which included regular surveys at banks regarding their risk structure and exposure, and also by elaborating gradual provision planning.

Although Liechtenstein has been one of the few European countries to retain stability there is still a need for regulation

As leaders in the field of risk and regulatory solutions FRSGlobal understands your business needs, our heritage in and in-depth knowledge of the financial market enables the development of our solutions to be so flexible that they meets the needs of ALL firms whatever the size or complexity.

FRSGlobal leads the way in risk and regulatory compliance solutions and has many referenceable clients in the UK who have taken solutions covering Swiss National Bank Statistics, Basel II equity requirements, large exposure risk and default risk, country risk, interest rate risk and market risk.

Regulatory Reporting Solutions — Liechtenstein

The Swiss National Bank also acts as the national bank of Liechtenstein; therefore financial intermediaries are required to submit reports to the Swiss National Bank. Additionally, banks in Liechtenstein have to provide supervisory reports to the Financial Market Authority Liechtenstein (FMA).

Statutory

Early information reporting
These reports cover early information on balance sheet and Income statement (FILI) required by the Financial Market Authority Liechtenstein (FMA) to be submitted on solo and consolidated basis.

Prudential

Basel II reporting
The Financial Market Authority, Liechtenstein (FMA) has adopted the Basel II framework for its risk based supervision. Banks are required to report information on calculation of own funds and eligible capital in addition to credit risk capital requirements (P_CRSALI [1-15] and P_CRSECSA), market risk positions (P_MKR) and operational risk (P_OPR).

Large exposures reporting
Exposures exceeding 25% of eligible capital (P_LE) are required to be reported to the FMA on quarterly basis. The FMA collects consolidated large exposures returns on semi annual basis from banks and investment firms. In addition, the FMA also collects returns on top ten largest debtors on solo and consolidated basis.

Liquidity reporting
These reports covering information on the liquidity position (L102) are required to be submitted to the Swiss National Bank on quarterly basis. In addition, monthly reports on cash liquidity statements are also required to be submitted to the SNB.

Statistical

Monthly Banking statistics
Banks and investment firms are required to report comprehensive balance sheet statistics to the Swiss National Bank on monthly basis. According to the guidelines of the Swiss Federal Banking Commission comprehensive monthly balance sheet reports broken down by residential status of customers or place of business, currency, amount of securities lending and borrowings etc. are required to be reported.

Consolidated banking statistics
These reports provide information on financial claims and liabilities of the banking sector on consolidated basis according to the guidelines of the Bank for International Settlements (BIS) broken-down by country, security (mortgages, Lombard, surety and guarantees, others) to be submitted on quarterly basis.

Currency statistics
Banks with foreign assets and liabilities exceeding CHF 1 billion are required to submit quarterly returns on currency statistics to the SNB.

Securities holdings
These reports provide information on securities holdings in open customer custody accounts, breakdown by category of securities (in particular money market paper, medium-term bank-issued notes, bonds, shares, investment fund certificates, other securities), by origin of issuers (resident or non-resident) and currency, breakdown of custody account holders by economic sector and by principal place of business or residence in Switzerland or abroad.

What’s Coming up — Liechtenstein

Risk reporting

The Financial Market Authority (FMA) - Liechtenstein recently amended its regulation governing capital requirements (Eigenmittelverordnung). From 31 December 2011, along with capital adequacy and liquidity additional reports on credit risk (P_CRSALI_01-16), market risk (P_MKR) and operational risk (P_OPR) based on the Basel II framework are required to be submitted to the FMA electronically.

Basel III

The FMA periodically issues publications on regulatory developments in global financial markets. In a publication issued on 1 July 2011, the FMA commented that Liechtenstein will follow the provisions of CRD IV under the EEA Agreement.

Solvency II

Recently a kick off meeting was held on Solvency II – Challenges and opportunities for Insurance companies by the FMA - Liechtenstein. The FMA presented the draft consultation on the revised Insurance Supervision Act for implementation of Solvency II- a risk based approach for insurance supervision. The consultation is open for feedback and concerns of insurance and reinsurance companies till 12 August 2011.

Solvency II

Solvency II is a fundamental and wide-ranging review of the capital adequacy regime for the European insurance industry. It represents both a challenge and an opportunity for European insurers. Globally it is scheduled to come into effect by 31 Dec 2012..

The project initiated by European Commission as an advancement to Solvency I is expected to enhance a revised set of EU-wide capital requirements and risk management standards..

The objective of new system is to introduce more sophisticated solvency requirements for insurers, in order to guarantee that they have sufficient capital to withstand adverse events, such as floods, storms or big car accidents..

Currently, EU solvency requirements covers insurance risks, whereas in future insurers would be required to hold capital also against market risk (e.g. a fall in the value of an insurer's investments), credit risk (e.g. when debt obligations are not met) and operational risk (e.g. malpractice or system failure). This will help to increase their financial soundness with implementation of sound economic risk management practices in insurance industry.

With a demand of more streamlined approach towards supervision, the new system would enable insurance groups to be supervised more efficiently, through a 'group supervisor' in the home country that would have specific responsibilities to be exercised in close cooperation with the relevant national supervisors.

The introduction of group supervisors would ensure that group-wide risks are not overlooked and would enable groups to operate more efficiently, while providing policyholders with a high level of protection. Groups that are sufficiently diversified may also be allowed to lower their capital requirements under certain conditions.

The Directive often referred as Basel II for insurers is based on a three pillar approach which is similar to the banking sector (Basle II) but adapted for insurance.

The new provisions of Solvency II will be adopted under the Lamfalussy process:

Level 1 – Solvency II directive includes overall framework principles developed by European Commission approved by European Parliament and European Council.

Level 2 –Includes introduction to implementation measures developed by European Commission and approved by European Insurance and Occupational Pensions Committee (EIOPC)

Level 3 –Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) will guide European Commission to enhance supervisory standards.

Level 4 –European Commission will finally monitor, Compile and enforce the regulation regime.

Maximum harmonization is assumed with the new Solvency II framework Directive. This means the European rules will be implemented all countries of the European Economic Area (i.e. the EU plus Iceland, Liechtenstein and Norway). The European Union’s Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has recommended to the European Commission that Bermuda, Switzerland and Japan will be the first countries assessed for equivalence with EU insurance regulations under Solvency II.

Thus the new solvency II requirements with challenges and opportunities ahead will be more risk-sensitive and more sophisticated than in the past, thus enabling a better coverage of the real risks run by any particular insurer.