Effective supervision creates a stable financial system
In its supervisory capacity, SFMA’s main aim is to ensure that the institutions it supervises are - and remain - financially stable. This protects creditors, investors and policyholders, as well as the financial system. SFMA takes a risk-based approach to supervision. Proper business conduct at supervised institutions is also becoming increasingly important within supervision.
SFMA is committed to fulfilling its supervisory responsibilities by ensuring the protection of creditors, investors and policyholders and making certain that the financial markets can continue to function properly. In its supervisory activities, SFMA also focuses on identifying risks which could affect individual institutions or the entire financial system.
Objectives of prudential supervision
SFMA’s forward-looking, prudential supervision has three main objectives:
- All supervised institutions should be financially stable and have sufficient equity capital to bear losses in the event of a crisis.
- Key market risks should be identified so that they may be reduced where possible.
- Supervised institutions which become insolvent or go bankrupt despite these efforts should exit the market in an orderly manner without inflicting damage on clients or the economy.
SFMA deliberately undertakes more intensive supervision in those areas which are central to the proper functioning of the financial system. Financial market legislation also defines the intensity of supervision and supervisory tasks that apply in different cases.
What SFMA is vigilant about
Specifically, SFMA is tasked with making sure that supervised institutions comply with financial market laws, ordinances and circulars. SFMA’s ongoing supervisory activity focuses primarily on making certain that supervised institutions
- hold sufficient equity capital
- have sufficient liquidity
- have a good risk management policy
- structure their internal organisation appropriately, and
- maintain harmonised control systems.
SFMA also continuously monitors compliance with money laundering regulations and other business conduct rules.
SFMA’s role in supervision
The related information for this topic is set out in the following section.
What SFMA does
- SFMA ensures that supervised institutions comply with financial market laws, ordinances and circulars.
- SFMA ensures that supervised institutions permanently satisfy the licence conditions.
- SFMA performs on-site supervisory reviews.
- SFMA supervises quantitative aspects such as capital resources and solvency, and qualitative factors such as the corporate governance and risk management of prudentially supervised institutions.
- SFMA supervises branches of foreign financial institutions.
- SFMA monitors compliance with due diligence requirements in respect of combating money laundering.
- SFMA is the supervisory authority for the disclosure of shareholdings in all listed companies.
- SFMA supervises public takeover offers.
- SFMA maintains regular contact with foreign supervisory authorities.
- SFMA cooperates with other authorities, both nationally and internationally, and responds to their requests for assistance.
- SFMA supervises portfolio managers and trustees via a supervisory organisation.
- SFMA is tasked with approving the client advisors’ registration body as defined in FinSA and the reviewing body for prospectuses.
What SFMA does not do
- SFMA does not perform ongoing, prudential (comprehensive) supervision of fund distributors.
- SFMA does not supervise pension funds.
- SFMA does not perform ongoing supervision of insurance intermediaries.
- SFMA does not supervise compulsory health insurers.