Introduction and Regulatory Framework

On March 19, 2025, FINMA published the Circular 2025/4 «Consolidated Supervision of Financial Groups under the BA and FinIA» (the Circular).

Pursuant to article 3b of the Federal Act on Banks and Savings Institutions (the BA) and article 49 of the Federal Act on Financial Institutions (FinIA), the Swiss Financial Market Supervisory Authority (FINMA) may subject financial groups regulated under the BA and FinIA, respectively, to its consolidated supervision. The main objective of FINMA’s regulatory consolidated supervision is to enable FINMA to assess the financial stability of institutions embedded within financial groups, considering not only individual entities but the group as a whole. By formalizing this regulatory approach on a consolidated level, FINMA aims to mitigate risks associated with interconnected financial entities and to ensure compliance with regulatory requirements on a consolidated level.

The scope of consolidated supervision (regulatory scope of consolidation) for banks and FinTech companies pursuant to article 1b BA is determined in accordance with article 3c BA and articles 21-24a of the Federal Ordinance of Banks and Savings Institutions (BO). Thereunder two or more entities of a financial group may be subjected to FINMA’s consolidated supervision, if: (i) at least one entity is licensed as a bank or a securities firm; (ii) the entities are predominately active in the financial sector and (iii) the entities form an economic unit or it must be assumed that the respective regulated entity would factually and/or legally be subject to a duty to provide support to the other relevant group entities (Beistandspflicht) (the Circular collectively refers to this requirement as forming part of an «interconnected system»). For securities firms regulated under FinIA, the regulatory scope of consolidation is determined in accordance with article 49 FinIA, whereas the provisions of the BA and the BO outlined apply by analogy to financial groups dominated by securities firms (article 49(3) FinIA).

To date FINMA’s supervisory practice has been communicated to the relevant regulated entities in the form of case-by-case decrees under which FINMA (i) confirmed that the requirements for a consolidated supervision were met and (ii) defined the scope of the consolidated supervision (and the requirements to be satisfied thereunder) for the respective financial group. With the Circular, FINMA intends to publish its existing regulatory practice and clarify the requirements for a consolidated supervision.

Further, the Circular only focuses on the consolidated supervision from a regulatory perspective, whereas the regulatory scope of consolidation may in practice differ from the scope of consolidation from an accounting perspective which is determined in accordance with the accounting standard applied by the respective financial group. It should be noted that in the case of international financial groups or conglomerates, different regimes of consolidation must also be taken into account that may not be fully aligned with the Swiss regulatory concept.

Requirements for a Consolidated Supervision

The determination whether a company is included in the regulatory scope of consolidation depends on two key factors: an activity in the financial sector and the relevant entities being part of an interconnected system. To the extent that these requirements are satisfied, the Circular clarifies that the consolidated supervision by FINMA, in general, covers all group companies of a financial group that are active in the financial sector. This includes, in particular, special purpose vehicles (SPVs) that meet the specific requirements detailed in the Circular for inclusion in the regulatory scope of consolidation. Consequently, in order to avoid that SPVs that were established for off-balance-sheet issuances are included in the scope of regulatory consolidation of the respective group, safeguards will have to be put in place to avoid the requirements set out below being met.

Activity in the Financial Sector

The term financial sector is broadly defined in article 4 of the Banking Ordinance. The Circular, however, provides additional clarifications regarding which activities should be considered being performed in the financial sector. The Circular includes a broad definition of the term activity in the financial sector and the term should in FINMA’s view cover the provision and intermediation of all kinds of financial services and is not limited to activities that are subject to licensing or registration requirements under the financial market laws of Switzerland. Pursuant to the Circular, the term activity in the financial sector includes activities, such as finance leasing, factoring, credit card business, participation in issuances, custody of securities, payment services, and the issuance and custody of payment instruments. In contrast, group companies that carry out purely commercial, industrial, or administrative activities are not considered to be active in the financial sector (article 4(1)(a) BO e contrario).

The Circular also clarifies that FINMA will apply a substance over form test, when assessing whether a specific activity should be deemed to constitute an activity in the financial sector.

Economic Unit

As outlined above, for two entities to form a financial group within the meaning of article 3b BA they must be part of an interconnected group. According to article 3c(1)(c) BA, in order for an interconnected system to be assumed, the companies operating in the financial sector must form an economic unit or be linked by a legal duty to provide support or a de facto obligation to provide support (Beistandspflicht). According to article 21(1) BO, an economic unit exists if a company directly or indirectly holds more than half of the equity or voting rights in other group companies or controls them by other means. The Circular provides further (non-exhaustive) clarifications on when a control by other means may be assumed; whereas a combination of different means of control will be taken into account by FINMA when assessing whether two entities form part of an economic unit. Pursuant to the Circular, the following constellations may be deemed a form of control:

• the control of voting rights on the basis of an agreement with other shareholders;
• the direct or indirect right to appoint or remove a majority of the members of the board of directors; and
• a significant influence on the management (g., through the – contractual or other – authority to exercise a significant influence over the executive management or business operations, for example through co-decision rights with regard to important decisions).

Duty to Support

The inclusion of a company in consolidated supervision can also be triggered by other elements, aspects and circumstances of a legal or factual nature that indicate a legal or de facto obligation to provide support. Article 21(2) BO sets out the main regulatory criteria for assessing whether a legal or de facto obligation to provide support applies. In this context the Circular further clarifies that a legal or de facto obligation to provide support pursuant to article 21 (2) BO may arise in particular from:

• strategic, personnel, organizational or financial interdependencies;
• cooperations and dependencies;
• the use of a joint company name;
• a uniform market presence; or
• letters of comfort, keep-well agreements or similar guarantees.

The Circular further clarifies that the list of circumstances mentioned above that may give rise to an obligation to provide support is not exhaustive. This means that other links can also lead to a de facto obligation to provide support if these may create the impression for third parties that there is an interconnected system.

Categorizing Financial Groups according to Structure

The Circular categorizes financial groups into different structures. With different regulatory requirements potentially applying to the different categories:

• Parent company structure: The financial group is headed by an institution (parent company) with operational business activities. The regulatory scope of consolidation includes the parent company and one or more group companies that are active in the financial sector.
• Holding structure: The financial group is headed by a holding company. The holding company controls at least one institution active in the financial sector. The top holding company active in the financial sector is generally the top unit of the financial group for consolidation purposes. In justified cases, FINMA may exclude a holding company from the regulatory scope of consolidation if it is immaterial for the consolidated supervision. A holding company is deemed immaterial if it (i) does not control any other company active in the financial sector, (ii) does not engage in financial activities of its own, (iii) has no influence on the group’s business activities, and (iv) is not significantly leveraged.
• Atypical structures: Atypical structures include contractual groups and similar structures as well as de-facto financial groups. In contractual groups, the group companies are linked by a contract rather than control of equity or voting rights. De-facto financial groups are headed by one or more individuals who control other companies active in the financial sector in addition to an institution domiciled or effectively managed in Switzerland.
• Subgroup of a foreign financial group: This financial group is subject to consolidated supervision by FINMA and is part of a foreign financial group. The subgroup may be controlled either directly by a foreign parent company or indirectly through a holding company or other entities of the foreign financial group. The subgroup can have different types of structures internally.
• Subordinated financial group: A subordinated financial group is a subgroup within a financial group supervised by FINMA, consisting of at least one institution based in Switzerland and one or more group companies operating in the financial sector. Internally, a subordinated financial group may have either a parent company structure or a holding structure.

Content of Consolidated Supervision

In application of the principles set out under article 3f and 3g BA as well as article 24(1) BO the Circular clarifies the content of the consolidated supervision of FINMA. Ultimately, it must, however, be noted that FINMA will specify the relevant scope of the consolidated supervision and the relevant requirements to be satisfied thereunder on a case-by-case basis in consideration of the specific group structure and underlying risks of the financial group in question.

From a qualitative perspective the consolidated supervision will typically require the financial group to implement the following measures, respectively, adhere to the following qualitative requirements on a consolidated basis:

• Appropriate organization of the financial group, in particular in consideration of the applicable requirements set out under the FINMA Circular 2017/1 – Corporate Governance Banks (with regulatory approval requirements applying for group internal policies);
• Appropriate internal control system and risk management of the financial group;
• Group-wide framework for the combatting of money laundering;
• Application of «Fit and proper»- requirements for individuals which are members of the executive management or board of directors on a consolidated level;
• Functional and personal separation of the board of directors and executive management at a consolidated level; and
• Appointment of a recognized, independent and competent audit firm for the consolidated audit of the financial group.

In addition to the qualitative requirements outlined above the consolidated supervision will typically also include the adherence to the quantitative requirements relating to capital adequacy, risk diversification (including interest rate risk reporting), liquidity and financial reporting standards on a consolidated basis.

In the context of the scope of the regulatory consolidation and the requirements to be satisfied thereunder, it should also be noted that the Explanatory Report relating to the Circular clarifies that any changes within a financial group that may have implications relating to the scope of consolidation and/or the requirements to be satisfied thereunder, must be notified to FINMA under the regulatory notification duty pursuant to article 29(2) of the Financial Market Supervisory Act.

Regulatory Exemptions from the Consolidated Supervision

Finally, the Circular clarifies that when determining whether to subject a financial group and/or certain entities to the regulatory scope of consolidated supervision, FINMA has a considerable degree of discretion. This discretion allows FINMA to grant regulatory exemptions in justified cases, namely in the following constellations:

• Exemption for immaterial group companies: Pursuant to the Circular, FINMA may exempt group companies in the financial sector from consolidated supervision or declare its content to be only partially applicable, particularly if a group company is immaterial for consolidated supervision (article 23(2) BO). FINMA grants exemptions for group companies with regard to the quantitative elements, but not with regard to the qualitative elements.
• Implementation of ring-fencing measures: In exceptional cases, FINMA may exercise its discretion and waive the requirement for consolidated supervision. To address the specific risks of the individual case, FINMA may, however, demand that the exempted financial group implement suitable preventive ring-fencing measures or other measures (g., adjustment of the group structure) instead of adhering to a consolidated supervisory regime. Pursuant to the Circular, the following measures may be suitable ring-fencing measures, whereas such measures will typically be applied in combination: (i) corporate governance-related or structural measures aimed at strengthening the independence of the institution’s management and decision-making bodies from the financial group, (ii) financial measures to protect client assets or to limit the institution’s financial interdependencies with the financial group, and (iii) reduction of business interdependencies. These measures would typically be combined with specific information and reporting obligations to FINMA.

Outlook

The assessment of compliance with the requirements regarding the consolidated supervision of financial groups is primarily conducted by the regulatory audit companies of the respective financial institutions and reported to FINMA under the yearly regulatory audit. As outlined above, the main purpose of the Circular is to publish FINMA’s existing practice regarding its supervisory activities over financial groups. Accordingly, we do not believe the Circular introduces any new or additional requirements beyond those that were already in place prior to its enactment.

The Circular does, however, provide helpful guidance on assessing the relevant requirements FINMA applies in the context of its consolidated supervisory activities. The clarifications included in the Circular may for instance provide helpful guidance on the measures which need to be implemented by financial groups intending to establish orphan issuance structures (namely white-labelling platforms) to avoid a regulatory consolidation of such issuance structures.

Homburger Hub – Regulatory Innovations

The Swiss financial market regulation remains subject to wide-ranging revisions with considerable developments expected for the years 2025 and 2026. The Federal Council has announced regulatory initiatives in the areas of the revision of the Financial Market Stability, Financial Market Infrastructure Act, and FinTech-regulation.

These regulatory developments will affect various Swiss financial market participants and are worth following closely. In order to ensure that you remain informed and up-to-date, we have established the Homburger Hub – Regulatory Innovations on which we regularly update on these regulatory developments.