Federal Law, Banks And Savings Banks, Section III, Equity, Liquidity etc.

Section III - Equity, Liquidity and Other Requirements Relating to Business Operations

Art. 4

1. Banks must provide for an adequate relationship between:

a) their equity and their total liabilities;

b) their liquid assets and their marketable assets on one hand and their short-term liabilities on the other hand.

2. The Implementing Ordinance establishes the directives to be observed in this respect under normal circumstances, taking into consideration the kind of business and the type of bank; it shall define the terms of own funds, liquid assets, marketable assets and short-term liabilities.

2bis. The qualified participation of a bank in an enterprise outside the fields of finance or insurance may not exceed the equivalent of 15 percent of its equity. The total of such participations may not exceed 60 percent of equity. The Federal Council decides upon exceptions.

3. In special cases the Banking Commission is authorised to permit less stringent application of the guidelines or to seek enforcement of more stringent provisions.

4. repealed


Art. 4bis

1. The extension of loans to any single customer, as well as the participation in any single company, must bear an appropriate relationship to the bank's equity.

2. The Implementing Ordinance establishes the lending limits with special consideration given to loans to public authorities and to the type of security furnished.

3. repealed


Art. 4ter

1. Credit may be granted to the bank's board and management and controlling shareholders, as well as to related persons, only in conformity with generally accepted principles of the banking profession.

2. Repealed


Art 4quater

Both in Switzerland and abroad, banks shall abstain from misleading publicity and, in particular, will not take undue advantage of their Swiss domicile or Swiss traditional practices or institutions.


Art 4quinquies

1. Banks, whose parent companies are supervised by banking or financial market supervisory authorities, may transmit information or documents not publicly available to their parent companies which are necessary for the purpose of consolidated supervision, in so far as:

a) such information is used exclusively for internal control or direct supervision of banks or other financial intermediaries subject to licence;

b) the parent company and the supervisory authorities responsible for consolidated supervision are bound by official or professional secrecy;

c) this information may not be transmitted to third parties without the prior permission of the bank or on the basis of a blanket permission in the state treaty.

2. In cases where doubt exists regarding the transmission of data pursuant to par. 1, banks may demand a directive from the Banking Commission to allow or forbid the transmission of information.


Art. 5

1. Banks shall transfer at least one twentieth of their yearly net profits into a reserve fund designated to cover losses and to permit write write-offs. The transfers have to be effected until this fund amounts to one fifth of the paid-in capital or, in the case of banks which have no paid-in capital, to one twentieth of the deposits.

1bis The following shall be allocated to reserve funds even after these have reached the statutory level:

a) any proceeds exceeding the nominal value of share issues or issues of mutual fund certificates after covering the issue costs;

b) one tenth of the amounts which are distributed from the net profits after regular allocations to the reserve fund and after a dividend or interest on mutual fund certificates of 5 % has been paid to the parties entitled to such a share in earnings.

2. This article does not apply to cantonal banks or to private bankers who do not publicly solicit customer deposits.

Prepared by: M. J. Wharton.

KPMG Fides unofficial translation of Swiss Federal Law - Banks And Savings Banks.
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