The asset management industry is a key pillar of Switzerland's financial center and plays an important role for the Swiss Financial Supervisory Authority, said Director Stefan Walter at Asset Management Day on Friday in Bern. It is dynamic, internationally networked and of great importance.

The range of products and services in asset management is constantly growing. At the same time, the geopolitical situation and the macroeconomic environment are currently causing considerable uncertainty. This is creating an area of tension and, as Head of Supervision, Walter currently sees three challenges facing the industry. Volatile markets would underline the importance of the resilience of collective investment schemes in relation to liquidity risks. The growing number of cyberattacks presents significant operational challenges for companies. As a third key issue, the head of the authority also addressed greenwashing: «Climate change and raising transparency demands are putting increased pressure on conduct obligations and customer protection,» he said.

«Collective investment schemes are a central component of our financial system. Their ability to remain stable even in times of stress is crucial - both for investor confidence and for the stability of the market as a whole», said Walter. In particular, funds with investments in less liquid markets, such as Swiss small and mid-cap shares, but also real estate funds, would have an increased liquidity risk. Market turbulence could also increase liquidity risks for bond funds and money market funds.

Proactive Risk Management

Finma is therefore focusing on the proactive management of liquidity risks, particularly fro open-ended collective investment schemes. The aim is to strengthen the resilience of these products and therefore ensure the long-term protection of investors.

With the revision of the Collective Investment Schemes Ordinance (CISO), it is now possible to carry out regular stress tests. In addition, fund management companies must draw up crisis plans and define measures and instruments for managing liquidity, processes and internal responsibilities.

Dependence on Third-Party Providers for Digitalization

With regard to cyber security, the head of FINMA is concerned about the growing dependence of companies on third-party providers, particularly in the area of cloud services. «Advancing digitalization brings with it many opportunities, but also opens up a growing attack surface», Walter continued.

In 2024, around 30 percent of reported cyber incidents were caused by attacks on external service providers. Finma therefore classifies the outsourcing of key functions as a key operational risk. Finma is therefore looking at cyber risk management as well as the emergency and recovery plans of companies and service providers and analyzing the reports of cyber incidents.

Self-Regulation on ESG Is not Enough

According to Walter, greenwashing risks are at the heart of climate change in the asset management industry. In recent years, the demand for sustainable financial products has risen sharply, as has the supply. These are referred to as «sustainable», «green» or «ESG».

When it comes to licensing and supervision, Finma pays particular attention to whether the promised sustainability features are clearly and comprehensibly explained, whether they are adequately disclosed and checks whether investors are being misled.

Here, Walter calls for improvements. Once again in the past year, an increased risk of greenwashing in the financial market was observed. «We have specified our expectations for the prevention and combating of greenwashing in a supervisory communication. This concerns the fund sector as well as the conduct obligations at the point of sale.»

Minimum Requirements Needed

However, Finma's scope for action is limited due to the incomplete legal basis. «The self-regulations of the industry associations do represent progress, but it is still not enough.» The Finma boss considers adequate supervisory minimum requirements indispensable in order to combat greenwashing effectively and credibly. What is needed are uniform definitions, cross-sectoral conduct obligations at the point of sale, as well as binding minimum requirements regarding product transparency and reporting.

Investors must be appropriately informed about risks, conflicts of interest must be avoided, and compensation by third parties must be disclosed.