The new circular shall apply to financial groups or conglomerates including a bank in the sense of the BA, a fintech licensed according to Art. 1b BA or a securities firm in the sense of the FinIA. It shall not apply to insurance groups, as their consolidated supervision is already covered by FINMA Circular 2016/4 on insurance groups.

Objective of the Draft Circular
The Draft Circular aims at formalizing FINMA's established practices concerning consolidated supervision. Until 2018, FINMA published its guidance on consolidated supervision through FAQs on its website, but since then, it has only communicated directly with supervised entities on an individual basis. The Draft Circular therefore does not introduce new rights or obligations for pre-existing financial groups or conglomerates.

Applicability of Regulatory Consolidation Requirements
Financial groups or conglomerates (referred to as "financial groups") are generally subject to consolidated supervision by FINMA if they either (i) own a Swiss bank in the sense of the BA, a Swiss fintech licensed according to Art. 1b BA or a Swiss securities firm in the sense of the FinIA, or (ii) are incorporated outside Switzerland, but they are, in substance, managed from Switzerland. Such consolidated supervision may be exercised by FINMA or a foreign regulator, depending on the home jurisdiction of the financial group.

In exceptional cases, FINMA may waive consolidated supervision requirements, particularly if adequate supervision by the foreign regulator is not feasible. In such cases, FINMA typically imposes ring-fencing measures or other structural adaptations to isolate the Swiss supervised entity from the foreign financial group.

Regulatory Consolidation Perimeter
The scope of consolidated supervision for banks and fintechs in the sense of the BA is determined under Art. 3c BA and Art. 21 to 24 of the Banking Ordinance ("BO"). For securities firms, the relevant scope is defined under Art. 49 FinIA.

The inclusion of a company into the regulatory consolidation perimeter depends on two factors: (i) whether the company's primary business activity is in the financial sector, and (ii) whether an economic unit exists between the entities involved, determined by reference to the majority ownership, control by other means, or by reference to a legal or de facto obligation to provide support.

Activity in the Financial Sector
Swiss regulation does not specify in an exhaustive list what constitutes an activity in the financial sector. Beyond the activities listed in Art. 4 para 1 and 2 BO, which generally cover financial services in a wide sense and include also insurance business activities, FINMA may consider further activities as financial in nature, such as financial leasing, factoring, credit card operations, securities issuance or custody, payment services, or the issuance or custody of payment instruments (including payment tokens). Special purpose vehicles (SPVs) are also considered part of the financial sector if their purpose relates to providing or intermediating financial services for the group or third parties. However, group companies that pursue a mere industrial or commercial purpose without a link to the financial sector would not fall into the scope of the consolidation.

Economic Unit Between Entities
Besides the control of the majority of capital or voting rights, an economic unit may be the result of other indicators giving rise to control (e.g. controlling the exercise of voting rights through a shareholder agreement or the exercise of control regarding the management) or obligations to provide assistance (either on the basis of agreements or due to the circumstances). In any event, FINMA assesses this on a case-by-case basis.

Supervised entities are required to immediately inform FINMA of any changes that could affect their regulatory consolidation perimeter under Art. 29 para 2 of the Financial Market Supervision Act ("FINMASA"). FINMA must be notified (i) if a new activity is started, expanded, or terminated abroad, or (ii) if the voting or capital rights in a company active in the financial sector reach at least 20%, or where other obligations to provide financial or other support may arise.

Entities Significant to the Group
The regulatory consolidation perimeter also includes companies that, while not active in the financial sector, are deemed significant to the group under Art. 2bis para 1 let. b BA and Art. 3a BO. These include group companies that perform essential functions for regulated activities, and that are domiciled in Switzerland. FINMA identifies such entities and maintains a public list on its website.

Distinction Between Regulatory and Accounting Consolidation
The scope of consolidation for preparing financial statements is based on the accounting standards used. In contrast, the regulatory scope of consolidation is determined by the relevant provisions of the BA, BO, and FinIA. As a result, the regulatory scope may differ from the accounting scope, particularly if non-financial companies are included in the regulatory consolidation perimeter due to de facto obligations to assist.

Financial Group Structures
FINMA distinguishes between different structures: parent company structures, holding company structures, and atypical structures, which are not exhaustively listed in the Draft Circular. According to FINMA's long-established practice, a holding entity may be excluded from the regulatory consolidation perimeter if specific conditions are met (e.g. ring-fencing of the FINMA regulated entity). FINMA also clarifies that sub-groups within financial groups constitute distinct structures. As a matter of example, the Swiss sub-group of a foreign financial group is generally supervised by FINMA (as host supervisor), while the foreign group is overseen by the home regulator.

Group-Level Requirements
The Draft Circular outlines group-level requirements, divided into qualitative and quantitative categories. Qualitative requirements include proper organization, internal controls, risk management as well as fit and proper assessments for management. Quantitative requirements cover capital adequacy, risk concentration limits, liquidity requirements, and the preparation of group-wide financial statements. Under Art. 23 para 2 BO, FINMA may waive some or all quantitative requirements for entities that are not material to consolidated supervision.