AFBS Info Digital - December 2019
This newly created AFBS Info Digital is dedicated to digital and technological trends, which are rapidly transforming the way the financial sector is operating. Please let us know if you wish to add an additional recipient from your bank to the mailing list or if you do not wish to receive this AFBS Info in the future.
The SBA working group met for the first time. It discussed the plan of drafting guidelines on the "ethical use of data" and related challenges. Bank customer secrecy was identified as a key obstacle towards efficient cross-border data management. Rather than restricting management of data geographically, regulation should assure that effective equal protection is guaranteed, irrespective of how, where and what data is transferred.
An exchange of views with the Data Protection Officer concluded that data processing by mandate does not require specific authorisation, even if abroad (Art 10a DPL); data processing by a third party is not deemed as giving confidential data to a third party (Art 12 II c DPL).
The SNB is mandated with the setting up of a crisis management platform for the entire financial centre. A first crisis exercise is planned to take place in 2020.
The AFBS Roundtable on Cloud Usage with an external consultant took place in November. Participants discussed challenges and solutions in relation with the outsourcing of data storage to the cloud. It became apparent that a new approach to data management and storage needs to be adopted.
AFBS Memo Nov 2019: LINK
As a report commissioned by the Federal Council shows that Switzerland is well positioned for the application and challenges of artificial intelligence (AI). For the financial industry, a benefit of AI is that costs are reduced because labour-intensive processes can be automated or accelerated to a considerable extent. Additionally, products can be developed more useful, cheaper or more tailored to the customer's needs.
According to the report, biggest challenges for the financial sector are the potential for abuse with modified input data as an operational risk, data protection issues, the low level of explanatory capacity of AI or certain appearances of possible discrimination. The FDF follows developments in AI in the financial sector without having considered AI-specific regulatory steps so far.
Switzerland does not have a general reporting duty for cyber incidents. Information on cyber incidents concerning critical infrastructures such as finance and insurance is exchanged on a voluntary basis via the Reporting and Analysis Centre for Information Assurance (MELANI). The newly created National Cybersecurity Centre in the Federal Department of Finance (FDF) will now examine whether the general reporting duties for disruptions to critical infrastructures should be extended. This is in line with the national strategy for the protection of Switzerland against cyber-risks (NCS). A proposal on enhanced reporting duties is expected by the end of 2020 at the latest.
Framework Conditions for DLT / Blockchain
On 27 November 2019, the Federal Council adopted the dispatch on the further improvement of the framework conditions for Distributed Ledger Technology (DLT) / Blockchain. The proposal is aimed at increasing legal certainty, removing obstacles for applications based on DLT and reducing the risk of abuse.
The Federal Council wants to provide a best possible framework condition to continue to evolve Switzerland as a leading, innovative and sustainable location for Blockchain companies. Moreover, it wants to consistently combat abuses and ensure the integrity and good reputation of Switzerland as a financial centre and business location. The Swiss Parliament is expected to examine the proposal for the first time in early 2020.
Central Bank Digital Currency
The Federal Council examined the opportunities and risks of introducing a so-called Crypto Franc (e‑franc). He pointed out that universally accessible central bank digital currency would not bring any additional benefits right now. The Swiss National Bank (SNB) shares this view.
The term central bank digital currency indicates money that a central bank could create in digital form and make available to the public. Other countries are also discussing central bank digital currency. Most central banks are examining the topic and the possible effects. However, only a few, such as China and Sweden, are planning to issue digital currencies in the short to medium term.