Switzerland: Banking In The Crosshairs: Investigations By Financial Regulators And Competition Authorities In The Banking Industry – Libor, Forex, What Next?

Last Updated: 11 September 2015
Article by Benjamin Dürig

Certain episodes of benchmark manipulation (Libor, Forex, etc) have generated global doubt and concern with regards to the integrity of many benchmarks, undermining the integrity of the system and legal and commercial certainty, and resulting in major losses for investors.

1. Have the authorities from your jurisdiction proposed or adopted any measures to ensure the necessary integrity of the market and of its benchmarks, guaranteeing that they are not distorted by any conflict of interest, that they reflect economic reality and that they are used correctly? (i.e.: measures to better protect investors, reinforce confidence, address unregulated areas, and/or ensure that supervisors are granted adequate powers to fulfil their tasks)

The short answer is no.

In the aftermath of the Libor and Forex "scandals" in 2012 and 2014 respectively, the Swiss Financial Market Supervisory Authority (FINMA) sanctioned the involved banks and initiated proceedings against some of their employees (see 6 below).

Also, in connection with both these Libor and Forex manipulations, the Swiss Competition Commission (COMCO) initiated investigations against several banks (see 4 below).

Finally, criminal proceedings against several individuals who were involved in these benchmark manipulations were initiated, all of which are still pending (see 6 below).

However, no new "general" measures to ensure the integrity of the market and its benchmarks were proposed by the authorities. It appears that the existing laws and powers of the supervisors, and in particular the display of these powers in connection with the Libor and Forex manipulation cases, are deemed adequate to ensure the integrity of the market and its benchmarks.

This was made clear by FINMA already in 2013 in connection with the revision of its Circular 2008/38 on "Market conduct rules" (now Circular 2013/08), which was revised due to a revision of the Federal Act on Stock Exchanges and Securities Trading (SESTA). The revised Circular now explicitly states that, for the "purpose of assessing the assurance of proper business conduct on the part of the supervised institutions [...], the provisions on insider information and market manipulation [...] apply not only in respect of securities admitted to trading on Swiss exchanges, but also mutatis mutandis in respect of [...] trading on markets other than the securities market (e.g. commodity, foreign exchange and interest rate markets), particularly in connection with benchmarks". However, in both its explanatory and consultation reports on the new Circular, FINMA points out that the cited passage of the new Circular has nothing to do with the revised SESTA but is merely a "formulation" of its long-standing practice. In this context, FINMA explicitly refers to its handling of the Libor case, in which the manipulation of foreign benchmarks was deemed a violation of the proper business conduct requirement (see 5 – 7 below).

Under current law, the foreign exchange market is not specifically regulated in Switzerland. In comparison to trading on stock exchanges, which is regulated by the SESTA, there are hardly any legal or regulatory norms that need to be complied with. This will not change due to the Forex manipulations. The upcoming changes in Swiss financial market law (in particular the Financial Market Infrastructure Act, FMIA, which will probably become effective end of 2015 / beginning of 2016) will create uniform regulation of financial market infrastructures and derivatives trading in line with market developments and international requirements (a case of "voluntary alignment" to EMIR and Dodd Frank, see 10 below). They will not, however, have an impact on "plain" foreign exchange trading.

Finally, it is noteworthy that the relevant penal provisions in Swiss law dealing with market abuse are aimed at securities trading only but are not designed to protect the integrity of benchmarks (see 6 below).

2. Which authority monitors financial bodies in your jurisdiction?

The Swiss Financial Market Supervisory Authority (FINMA).

When it comes to anti-trust aspects, the Swiss Competition Commission (COMCO) is competent to investigate in the financial sector.

3. [For EU and EFTA member states] has your country completed the transposition of Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments (also known as «MiFID II»)? If not, when will transposition be completed?


Switzerland is implementing large parts of MiFID II on an autonomous level in the form of "voluntary alignment" (see 10 below) in order to ensure that Swiss financial service providers keep their access to the European financial markets and that Swiss supervisory law is deemed "equivalent" to European law. For this purpose, the afore-mentioned FMIA (see 1 above) and other new financial market laws are being implemented at the same pace as MiFID II and the respective regulations (MiFIR, EMIR etc.).

4. Have the authorities in your jurisdiction conducted any inquiry on leading banks or institutions in relation anti-trust practices with regards to essential financial information and/or the clearing system?


The Swiss Competition Commission (COMCO) has been investigating the two biggest (and systemically relevant) banking groups in Switzerland, UBS AG and Credit Suisse Group AG, along with six more banks with regard to the manipulation of foreign exchange rates since March 2014. The investigation is still pending.

The authorities are examining whether the banks colluded to fix foreign exchange rates, e.g. by exchanging confidential information, co-ordinating with others in the market to execute transactions at an agreed price, and attempting to influence the WM/Reuters rates.

Further, in connection with the Libor manipulations, COMCO has been investigating potential unlawful agreements among banks since February 2012 – investigation still pending. The investigation is directed against UBS AG and Credit Suisse Group AG, as well as against more than ten foreign financial institutes and other companies.

5. Which new requirements have been established in order to reinforce governance and oversight and introducing measures sanctioning those responsible for LIBOR and other index manipulation?


In connection with Libor, UBS AG had voluntarily taken a number of measures aimed at preventing such misconduct in the future. Specifically, UBS AG's procedures for Libor submissions were fundamentally revised, corresponding procedures for Euribor submissions were implemented, an overarching Benchmark Submissions Policy was put into place and various measures such as trainings, oversight and compliance review were adopted.

In connection with the findings of its internal investigations, UBS AG dismissed numerous employees. Other employees had at the time already left the bank, were reprimanded, temporarily suspended and/or had their salary reduced. That measure included managers and staff.

In the order, FINMA admonished UBS AG for severe violation of the organisational as well as the proper business conduct requirements under Swiss financial market laws. Additionally, FINMA imposed various supervisory measures aimed at further strengthening UBS AG's interest reference rate submission processes.

Finally, FINMA ordered UBS AG to disgorge estimated profits resulting from Libor manipulations amounting to CHF 59 million to the Swiss Confederation.


In connection with Forex, FINMA has demanded UBS AG to:

  • strengthen the compliance function as an independent control function;
  • limit the utilization of certain communication media and monitoring their utilization ("chats");
  • prohibit certain employee transactions ("jamming", "front running", "partial fills", etc.);
  • mandate internal audit with various audits particularly with regard to compensation schemes and establishing a report on the findings;
  • strengthen the whistleblowing process.

Furthermore, FINMA imposed extensive additional measures to promptly remediate the organizational shortcomings revealed during the proceedings:

  • For the entire global foreign exchange and precious metals business, the maximum annual variable compensation was limited to 200 per cent of the basic salary for a period of two years. For other individuals at the investment bank in Switzerland who receive a total remuneration of more than CHF 1 million, a similar rule was imposed (with exceptions possible, if granted at board level);
  • UBS AG was obliged to automate at least 95 per cent of its global foreign exchange and precious metals trading, as well as to install effective controls for the remaining voice trading;
  • UBS AG has to implement measures that prevent conflicts of interest between client and proprietary trading (in particular separation at an organizational and staff level).

In order to ensure the complete implementation of those measures, FINMA has mandated a third-party investigator.

Finally, FINMA ordered UBS AG to disgorge estimated profits resulting from Forex manipulations amounting to a total of CHF 134 million to the benefit of the Swiss Confederation (which is the highest amount ever confiscated by FINMA).

In order to establish the knowledge and conduct of the individuals involved in the case, FINMA also initiated proceedings against eleven of the bank's former and current employees (which may result in a prohibition from practising a profession in the financial sector, see 6 below).

6. Has any similar scandal-malpractice affected your jurisdiction? Have penalties been imposed? and/or administrative or criminal sanctions? If not, which sanctions are foreseen in your jurisdiction for this type of misconducts?

No similar scandal-malpractice has affected Switzerland.

As the relevant penal provisions in Swiss law dealing with market abuse are aimed at securities trading only, they are not applicable with regard to manipulating benchmarks. Although it is possible to construe benchmark manipulations as embezzlement, fraud or, in the case of front running, breach of the banking secret according to the Swiss Penal Code and the Banking Act respectively, to our knowledge there is only one criminal investigation pending with regard to Libor manipulations against a former UBS trader (as a matter of fact, it seems that the investigation has not even been formally opened after more than one year). On the other hand, the Office of the Attorney General of Switzerland has initiated criminal investigations against several individuals involved in the Forex "scandal" in late 2014. These investigations are pending. In case of a condemnation, the defendants would be subject to imprisonment of up to three years or monetary penalties (which depend on the income of the defendant).

The legal basis for FINMA to intervene in the Libor and Forex manipulation cases were the requirements for proper business conduct and adequate organisation which apply on any bank (see 7 below). In this context, the possible sanctions range from orders to restore compliance, over the issuance of a declaratory ruling (which may be published - "naming and shaming") and prohibition from practising a profession in the financial sector for individuals to the confiscation of profits that result from the violation of the supervisory provisions at hand. As ultima ratio, FINMA can revoke the licence of a supervised person or entity and, as the case may be, liquidate it. However, FINMA does not have the competence to impose penalties.

It remains to be seen how COMCO will qualify the conduct of the involved banks with regard to Libor and Forex (see 4 above) as COMCO may hand down administrative penalties in the amount of 10 per cent of the turnover achieved in Switzerland in the last three years by the company in question.

7. How are the potential conflicts of interest affecting banks or other financial institutions addressed in your jurisdiction? Which requirements are adopted to ensure that benchmarks reflect economic reality and that they are used correctly?

Conflicts of interest are addressed in civil law insofar as a client relation with a service provider in the financial sector is qualified as a mandate which means that the agent has to avoid any conflict of interest due to its obligation of loyalty towards the client. In this context the Federal Supreme Court has ruled in 2012 that all retrocessions, kickbacks and other third party compensations paid to asset managers have to be handed over to the client unless the client has expressly and knowingly renounced such payments. However, when it comes to benchmark manipulation, there is not necessarily a direct contractual relation between the bank manipulating the benchmark and the investor losing money. Also, it would be quite difficult for an individual to prove its loss due to the manipulation.

Conflicts of interest are further addressed in supervisory law. Since the manipulation of the Libor benchmark and other market manipulation cases, FINMA has made it clear that market manipulation will not be tolerated regardless of whether a regulated or unregulated market is concerned, based on the following grounds:

According to Swiss law, a bank needs to have an organization adequate to its business activities and to permanently fulfil the requirements for proper business conduct. Manipulative market abuse such as insider trading and unilateral exploitation of information to the client's or other market participants' disadvantage or other repeated conduct that breaches the bank's duty to act in the clients' interests is irreconcilable with the requirements for proper business conduct and thus subject to sanctions by FINMA (see 6 above for possible sanctions). This applies in particular for inappropriately influencing closing rates and benchmarks.

A bank needs to be capable of capturing, monitoring and limiting operational and legal risks arising from its business activities. In order to do so, the bank is obliged to have an adequate and effective control system. Professional standards for business conduct must be implemented by internal regulations and adhered to. Banks and their employees have to conduct themselves in a manner that does not compromise the institution, i.e. they should not damage their own reputation, the trust clients have in them or the reputation of the Swiss financial market place. Failing to comply with these obligations is subject to sanctions by FINMA.

8. Are any measures foreseen in your jurisdiction for the protection of "whistleblowers"?

Under Swiss labor law, there is no particular protection of whistleblowers. Whistleblowing employees risk to lose their employment. Even if the termination of their employment agreement is deemed abusive, they will not be re-employed but are only entitled to damages equivalent to up to six months of salary.

Currently, the Federal Parliament is discussing a law with regard to whistleblowing but it does not seem that this is going to massively improve the protection of whistleblowing employees.

However, a lot of large companies, and in particular the bigger banks in Switzerland have their own whistleblowing policies and/or operate whistleblowing hotlines that allow employees to report inappropriate conduct without having to fear repressions.

Considering that FINMA has ordered UBS AG to strengthen the whistleblowing process as a consequence of the Forex manipulation case (see 5 above), the protection of whistleblowers may even be considered as part of an adequate organization of a financial institution under supervisory law.

9. Is there any measure in place in your jurisdiction to guarantee suitable and appropriate evaluation of benchmarks?

There are provisions in various fields of law that may prevent benchmark manipulation, ranging from civil and criminal law to supervisory and competition law (see 6 and 7 above). However, these provisions are not tailor made for benchmark protection but apply on a case by case basis only.

10. Which requirements and/or transparency rules –if any- are undertaken in your jurisdiction in order to prevent distortions of competition resulting from divergences between other national laws and/or to provide more legal certainty for market participants? (i.e. to prevent or limit regulatory complexity and potential regulatory arbitrage)

In Switzerland, which does not participate in the EU, but which is surrounded by EU-member states, the lawmaker has long since learned to closely watch foreign regulatory and legal developments and to adapt its own legislation accordingly in order to grant Swiss companies access to those foreign markets. This practice has been called "voluntary alignment", even if it is not always voluntary.

Transparency is guaranteed as interested circles are consulted by the administration during the lawmaking process, which does not mean that their input is always implemented in the draft law which is then submitted to the parliament and, as the case may be, the people.

Obviously, as the Swiss way is reactive and the directly democratic lawmaking process in Switzerland often takes longer than in other countries, there can be periods of divergences between national and foreign law which are not beneficial to Swiss market participants.

More so, sometimes the Swiss people, by referendum or initiative, voluntarily implement rules that are incompatible with foreign law. This was recently the case when the people adopted the "mass immigration" initiative which aims at restricting the amount of foreigners coming to work in Switzerland and therefore conflicts with the free movement of people treaty between Switzerland and the EU. Negative economic effects are likely to result from such decisions but they have to be accepted and implemented by the Federal Council and the Parliament.

Previously published by the International Association of Young Lawyers

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions