Avaloq Sourcing Switzerland & Liechtenstein

Newsletter - Issue II 2019

Compliance: FATCA 8966  |  FIDLEG  |  CSDR  |  CRF reporting with go AML  |  GDPR II  |  SFTR  |  SRD2  |  EU EMIR REFIT  |  CDB 20

Payments: Swiss Payment Harmonization

Industry Standard: TPA  |  LIBOR Transition  |  ESG  |  SMR 8.1

FATCA 8966 Pool Reporting and Group Request

Banks affected: All community banks
Mandatory effective date: Various
Solution status: Committed
Solution implementation date: Q4 2019 or Q1 2020


FATCA 8966 Pool Reporting and Group Request (applicable to Swiss Banks only)
Since the 2014 tax year, Swiss financial institutions have been providing the US Internal Revenue Service (IRS) annually with FATCA 8966 pool reports concerning ‘non-consenting’ and ‘non-participating foreign financial institution (NPFFI)’ clients. Only the total number of these clients and their total cumulative balance are disclosed in the pool report.

On 20 September 2019, Switzerland and the US exchanged the instruments of ratification of the protocol of amendment to their double taxation agreement (DTA). The protocol came into force on the same day, but the IRS’s group request to the Swiss Federal Tax Administration (FTA) to provide the details of the underlying clients as part of 8966 pool reporting is still pending and could be made anytime.

Once the FTA authorities receive such a request, they will in turn contact the Swiss financial institution to provide the clients’ details within ten days. For every such account, the financial institution has to provide the FATCA 8966 XML, the SEI XML and the underlying prescribed documents. Such group requests can cover information going back to 30 June 2014.

Modifications to 2019 QI reporting
Based on the first assessment of the technical standards recently published by the IRS, we envisage just pure technical modifications: a new field “Withholding Partnership Interest Indicator” on the QI 1042s reporting form as well as the new income code 55 (taxable death benefits on life insurance contracts).

Our approach

FATCA 8966 Pool Reporting and Group Request
The new solution has already been delivered and is currently being implemented for all interested clients. Few minor modifications could be newly delivered in the near future.

Modifications to 2019 QI reporting (delivery in Q1 2020)
We take care of the ordinary maintenance of the QI and FATCA reporting solution based on the requirement updates issued yearly by IRS. The required modifications will be delivered in Q1 2020 in line with the reporting due dates, following the usual process via update levels for BPaaS and SaaS clients. The previously announced entitlement to make the withholding tax rate no longer applicable for Swiss third pillar (3a) pension schemes will not be managed through a software delivery. Banks are required to apply the related exemptions in Avaloq.

Key dates

Q4 2019
FATCA 8966 Pool Reporting and Group Request: solution delivery

Q1 2020
FATCA & QI - 2019 reporting modifications: solution delivery


FINSA Financial Services Act (FIDLEG)

Banks affected: CH banks
Mandatory effective date: 1 January 2022
Solution status: Committed
Solution implementation date: Various


The Swiss parliament approved FIDLEG in June 2018 with the aim of improving client protection, creating uniform competitive conditions and enhancing investor protection. To this end, it lays down clear rules on how financial service providers conduct business at the ‘point of sale’ and establishes common conditions for participants in the Swiss financial market.

The accompanying ordinance (FIDLEV) has been issued on 06 November 2019 and will come into force together with the act on 1 January 2020. Within two years, financial service providers must fulfil the duty to classify clients and information as well as verification and documentation duties (‘rules of conduct’).

Compared to the draft ordinance published in 2018, which was the baseline for our solution design, the final version does not introduce any main operational modifications, apart from the requirement of stating the investment strategy and considering the client’s risk inclination when performing the suitability check.

Our approach

The whole scope of FIDLEG is managed as a client community project, with some relevant features covered by the ASM Evolution 2020 scope. Work on the solution already got under way in 2019 and is due to be completed for all BPaaS and SaaS clients in 2020.

Key dates

Solution delivery via releases


Central Securities Depositories Regulation (CSDR) 

Banks affected: Depending on the requirement, mainly EU banks
Mandatory effective date: Different phases running from Q4 2018 (Phase I) until 2020 (Phase III)
Solution status: Considered
Solution implementation date: Q3 2020 (Phase III)


The CSDR is one of the key regulations adopted to combat the effects of the financial crisis. It aims to increase the safety and efficiency of securities settlement and settlement infrastructures across the EU and to harmonize the rules applied by central securities depositories (CSDs).

The CSDR applies to all CSDs in the EU and EFTA, which includes Switzerland and Liechtenstein. In addition, Article 37 of the CSDR is deemed to be equivalent to Article 62 of the FMIA (FinfraG). The main impact of the CSDR affects CSDs in various areas, such as corporate governance, risk management, compliance, capital requirements, admission procedures and the recording of additional information (e.g. LEI, country of incorporation of participant, governing law of securities, etc.).

In any case, certain duties are already having an impact on CSD participants, i.e. banks, directly or indirectly, as they are obliged to comply following the modification of CSD procedures and SLAs. While some requirements will only affect the business relationship between CSDs and their participants (such as collateralization of credit exposures or collateral eligibility and valuation) or between CSD participants and their customers (i.e. the transparent and clear offering of individual segregation versus omnibus segregation), other requirements will directly call for the enhancement of systems and processes.

Our approach

The implementation of CSDR requirements is being treated as a client community project and has been divided into three phases:

Phase 1: Daily securities reconciliation
Considering the increasing reconciliation volumes to be managed daily, an enhanced back office service has been offered to our client community based on a strengthened Avaloq solution driven by MT535 and MT536. The solution for phase I was presented to the community in July 2018 and the implementation started in Q4 2018.

Phase 2: Reporting by settlement internalizers
According to Article 9 of the CSDR, settlement internalizers shall report to the competent authorities of their place of establishment on a quarterly basis the aggregated volume and value of all securities transactions that they settle outside securities settlement systems (settlements not carried out on a system platform and not involving the custodian directly), specifying asset class, type of securities transactions, type of clients, and issuer central securities depository (CSD). The first report was due to be submitted on 12 July 2019 and had to cover the transactions performed in Q2 2019.
A reporting solution for phase 2 was presented to our client community in November 2018 and the implementation started in Q1 2019.

Phase 3: Settlement discipline regime
This is the last and most impactful phase, and its date of application is 13 September 2020. The CSDR will introduce a settlement discipline regime, which will require participants to settle their transactions on intended settlement date. It will also require CSDs to take measures to:
• encourage the timely settlement of transactions by their participants;
• monitor settlement fails and provide regular reporting to the competent authorities;
• prevent settlement fails, introducing measures which focus on trade confirmations and the allocation process;
• address settlement fails through mandatory cash penalties and a buy-in mechanism.

This section of the CSDR will affect all participants of every CSD in the EU and will have a widespread market impact. The CSDR settlement discipline regime will apply to all market operators in the context of European securities settlement and all European CSDs. It will apply to all trading entities regardless of their domicile if they settle transactions on a European CSD.

Settlement discipline is covered in Articles 6 and 7 of the CSDR and in the Commission’s delegated and implementing acts. The European Securities and Markets Authority (ESMA) published regulatory technical standards (RTS) on settlement discipline on 13 September 2018 which specify measures to prevent, monitor and address settlement fails and the introduction of cash penalties and a buy-in process.

Our solution will be focused on the activation, setting up and correct management of the new ISO 15022 SWIFT messages, MT537 (statement of pending transactions) and MT548 (settlement status and processing advice), which will be used to communicate with CSDs. The solution will be presented in a dedicated webinar, expected in Q1 2020.

Key dates

Q2 2018
Phase I – Webinar

Q4 2018
Phase I – Going live

Q4 2018
Phase II – Webinar

Q2 2019
Phase II – Going live

Q1 2020
Phase III – Webinar


Cellule de renseignement financier (CRF) reporting with goAML

Banks affected: LUX Banks
Mandatory effective date: N/A
Solution status: Considered
Solution implementation date: To be defined


Luxembourg’s Financial Intelligence Unit (Cellule de renseignement financier, CRF), or FIU, is using an electronic system for submitting and processing suspicious activity reports. This system enables reporting through an online platform called goAML.

Suspicious activity reports, their attachments and additional information must be uploaded and submitted online only. Documents that have to be submitted to the local FIU upon request may no longer be sent by fax or post but submitted via the online platform. Large volumes of data can be uploaded using an XML upload functionality.

Financial intermediaries in Luxembourg may only use goAML, the tool provided by UNODC (United Nations Office on Drugs and Crime), to report suspicious cases of money laundering to the local FIU. The system allows for two types of usage:
• entering the suspicious cases manually in the user interface of the new tool; or
• preparing, in a semi-automatic way, the data to be sent out from the banking system and using the tool only to transmit the generated file (via an XML upload).

Our approach

Avaloq decided not to plan any activities in this field but to offer an automatic interface with goAML via a Confinale (Avaloq software partner) reporting solution, which is fully integrated into Avaloq.

We have already proposed a solution to our community banks in Switzerland that meets the XML requirements of the Money Laundering Reporting Office in Switzerland (MROS). We are now willing to offer a similar solution to our clients in Luxembourg. The solution adopted for the Swiss market can be partially reused to cover the requirements of CRF reporting in Luxembourg, with an additional delta effort for the specific A&D activities to be foreseen.

Key dates

Q1 2020
Expected client communication and feedback


General Data Protection Regulation (GDPR) - Phase II 

Banks affected: EEA Banks
Mandatory effective date: May 2018
Solution status: Considered
Solution implementation date: 2020


The GDPR has been designed to give EU citizens greater control over their personal data by introducing new data protection principles and new data subject rights.

The GDPR impacts many areas of an organization, not just legal and compliance: individuals and teams tasked with information management must ensure they have in-depth knowledge about: • What data is collected?
• How data is processed?
• Where data is stored?
Organizations processing personal data on a large scale are required to appoint a qualified data protection officer to supervise the E2E data management process.

Our approach

The implementation of the GDPR ASM enhancement with the ASM solution provided our client community with a common solution for facing the main GDPR challenges:
• consent management;
• right to access and portability;
• right to be forgotten.

During phase I of the GDPR project, Avaloq provided:
• a personal data wiping solution to manage the right to erasure (Art. 17 GDPR);
• a feature for the right to access and portability;
• a new flag for consent management.

During phase II of the GDPR project, Avaloq will provide:
• the application of the 4-eyes check principle to the personal data wiping feature;
• the automation of the personal data wiping feature;
• the GDPR solution for AFP online banking.

Key dates

24 October 2019


Securities Financing Transaction Regulation (SFTR)

Banks affected: EU Banks
Mandatory effective date: April 2020
Solution status: Considered
Solution implementation date: Q4 2019


The Financial Stability Board (FSB) and the European Systemic Risk Board (ESRB) have identified the risks posed by securities financing transactions (SFTs). The Securities Financing Transaction Regulation (SFTR) covers the need to improve the transparency of securities financing markets. The new rules introduced by the SFTR include all collateralized transactions such as repos, securities, commodity lending, borrowing transactions, margin loans and total risk return swaps. Both financial and non-financial companies will be obliged to report transactions to approved trade repositories (certified by ESMA).

This regulation applies to:
• a counterparty to an SFT established in the EU, including all its branches;
• a counterparty in a third-party country if the SFT is concluded during the operations of a branch of that counterparty in the EU;
• other financial institutes, such as AIFMs (alternative investment fund managers) and UCITS (undertakings for collective investment in transferable securities).

The SFTR will require the following information to be included:
• counterparty data, including legal entity identifiers (LEIs);
• loan and collateral data, including unique transaction identifiers (UTIs);
• margin data;
• reused information.

Reports must be submitted to an authorized trade repository by no later than one working day after the SFT has been made (T+1).

Our approach

The regulatory technical standards (RTS) were published on 22 March 2019. Avaloq has finalized the technical analysis to determine which clients are impacted and what activities are required for the project. The delivery of our solution has been planned based on release planning and the regulation’s legal timeline.

The aim of this project is to ensure that our solution aligns with the reporting standard.

Key dates

December 2019
Expected finalization of the solution document

April 2020
Expected going live of project


Shareholder Rights Directive II (SRD II) 

Banks affected: All EEA and CH banks established in the EU
Mandatory effective date: September 2020
Solution status: Considered
Solution implementation date: To be defined


The Shareholder Rights Directive (SRD I) was adopted in 2007, the main objective of which was to grant minimum rights for shareholders of listed companies across the European Union (EU).

SRD I included several specific requirements:
• timely access for shareholders to all information relevant for general meetings;
• facilitation of exercising voting rights on a cross-border basis by correspondence and by proxy.

SRD I abolished share blocking and related practices, since they constitute a major obstacle to shareholder voting. This was particularly beneficial for institutional investors. The directive also introduced the right to ask questions at the general meeting.

The Shareholder Rights Directive II (SRD II) amends the first directive with the objective of improving corporate governance in companies whose securities are traded on EU-regulated markets. With the amendments planned as part of SRD II, the EU is aiming to further strengthen the position of shareholders within the company and to ensure that decisions are made considering the long-term stability of a company.

SRD II will ensure the efficient functioning of EU capital markets with common formats of data and message structures in transmissions between intermediaries, issuers and shareholders.
The use of standardized and machine-readable formats will make it easier for (cross-border) shareholders, who are not intermediaries, to access information necessary to react within a reasonable time frame.

Image source https://indeed.headlink-partners.com

The chart above describes the main impact of SRD II in terms of information sharing, voting, transparency and remuneration policy for its main stakeholders.

Swiss entities are not directly subject to SRD II. However, SRD II does apply if they provide services such as share safekeeping, share administration or maintenance of securities accounts on behalf of shareholders or other persons who are subject to SRD II and if the Swiss entity was established in the EU and is therefore qualified either as:
• an investment firm in terms of MiFID II;
• a credit institution in terms of CRR; or
• a central securities depository in term of CSDR.

In this case, Swiss entities must comply with the following SRD II obligations:
• facilitation of the exercise of shareholder rights;
• non-discrimination, proportionality and transparency of costs;
• transmission of information;
• identification of shareholders.

Proxy advisors who carry out their activities regarding shares of EU companies through an establishment in the EU, regardless of the form of that establishment, are also subject to SRD II.

Our approach

It’s foreseen to deliver a solution and service in the second half of 2020 but in line to be compliant with the deadline of 3rd of September.

Key dates

3 September 2020
Deadline for local enforcement of the act adopted by the European Commission


EU EMIR Refit: derivatives reporting obligations – Phase I

Banks affected: EEA banks and Swiss banks involved in EMIR reporting
Mandatory effective date: 18 June 2020
Solution status: Considered
Solution implementation date: Q2 2020


In May 2017, the European Markets Infrastructure Regulation (EMIR) was revised by the Commission’s Regulatory Fitness and Performance (Refit) programme. The objective of the revision (EMIR Refit) was to improve the transparency of over-the-counter (OTC) derivatives positions and exposures, as well as to simplify and better balance the clearing and reporting obligations for market participants.

It was found that the EMIR did indeed impose excessive burdens on certain market participants. Accordingly, the Refit revision aims to modify certain requirements and realign the obligations of the regulation to the systemic risk of market participants. The revised version should enable estimated cost savings in one-off and operational costs by reducing compliance costs and insufficient access to clearing.

The key amendments to the regulation include in particular the clearing obligation, the suspension of the clearing obligation, reporting requirements, risk mitigation techniques for OTC derivatives contracts not cleared by a central counterparty, the registration and supervision of trade repositories, and the requirements for trade repositories.

Our approach

EMIR Refit affects a wide range of requirements, mainly:
• Introduction of new classifications: FC+, FC-, NFC+, NFC-, TCE (third-country entity);
• New rules to classify counterparties: AIFM (alternative investment fund manager), CSD (central securities depository) and FC/NFC based on positioning against certain thresholds per asset class (which must be calculated by the bank);
• FC+ mandatory establishment of central clearing arrangements;
• Updated reporting obligations (immediate/delayed).

With this first project phase and given the existing EMIR solution, only the updated reporting obligations (delayed provisions) are relevant to our client community.

The focus has been defined considering solely the new responsibility and legal liability of financial counterparties (FC), in case of trading with non-financial counterparties (NFC-), for reporting on behalf of both counterparties and for ensuring the correctness of the details reported.

There is no immediate system change planned for REGIS-TR and DTCC reporting. These changes, including new regulatory technical standards (RTS) for reporting that ESMA will publish in June 2020, will be proposed to our client community in a second phase of the project.

Key dates

Q1 2020
Avaloq solution presentation

18 June 2020
Applicability of reporting obligations – delayed provisions

H2 2020
Applicability of new RTS and start of project phase II


Revised agreement on the Swiss banks’ code of conduct regarding the exercise of due diligence (CDB 20) 

Banks affected: CH banks
Mandatory effective date: 1S January 2020
Solution status: Considered
Solution implementation date: Q4 2019


The revised ‘Agreement on the code of conduct regarding the exercise of due diligence (CDB 20)’ was issued by the Swiss Bankers Association (SBA) as a stricter self-regulatory agreement and was approved by FINMA. Among other matters, the revised agreement addresses the need for improvement identified by the Financial Action Task Force on Money Laundering (FATF) in the fight against money laundering and terrorist financing.

The CDB 20 will come into force on 1 January 2020 together with FINMA’s revised Anti-Money Laundering Ordinance (AMLO-FINMA).

Our approach

We analysed the set of documentation available, focusing mainly on FINMA’s amendments from 20 June 2018 to the Anti-Money Laundering Ordinance (AMLO), and we identified the following points that may impact the ASM standard solution:
• Amendments to Article 51 para. 1(b) and Article 56 para. 5: for cash transactions, the threshold amount for the identification of the contracting partner has been lowered from CHF 25,000 to CHF 15,000.

With respect to this point, we asked our client community to open a ticket if they use the cash desk and need to correct the threshold accordingly. Avaloq will cover the ticket cost.

• Changes to Article 13: all the references to FATF high-risk or non-cooperative countries. For this change, we expect that these countries are already defined as high risk within the Avaloq system. Should this not be the case, we asked our client community to open a ticket in order to change the country classification. Avaloq will cover the ticket cost.

We are aware that there could be other changes in the CDB 20 that are not listed above (e.g. changes to the rules regarding account opening without complete documentation are not considered). The reason for this is that they will not impact standard ASM functionality.

Key dates

Q4 2019
Expected resolution of tickets


Harmonization of Swiss payments

Banks affected: CH banks
Mandatory effective date: 30 June 2020 (QR code)
Solution status: Considered
Solution implementation date: Q4 2019 - Q2 2020


The Swiss Payment Council (SPC) has tasked the Payments Committee Switzerland (PaCoS) with drawing up Swiss payment standards for implementation based on ISO 20022.

The harmonization of Swiss payments includes the adoption of the new payment standard related to five streams: credit transfer, direct debit, cash management, payment slips, and QR billing and e-billing.

In this issue of our newsletter, we will provide you with updated information on QR billing, which will replace the current payment format that uses red and orange payment slips with the new format that uses the QR code. The QR code will contain, in digital form, all the information necessary for payment processing.

By introducing this new standard, it will be possible to eliminate the different types of payment slips in Switzerland. This will increase the efficiency of payment processing and simplify payment traffic, while at the same time prepare banks for the new challenges posed by digitalization. A transitional period, during which it will be possible to use the current payment slips in parallel with QR bills, is also planned and presented in the chart below.

The new QR billing will be introduced on 30 June 2020, and all market participants will be required to be able to use QR bills for payment processing from that point in time on.

Image source: paymentstandards.ch

Our approach

Considering the complexity of the project and its impact on several areas of payment processing, Avaloq decided to split the project into three requirements. This approach enables us to better define the scope and the Avaloq solution with regard to banks’ business requirements and specific enhancements.

The following three requirements have been defined:
1. Incoming and outgoing payment processing: Both incoming and outgoing payments will include all the new information derived from scanning the QR Code, in line with the new ISO 20022 requirements. The Avaloq solution will include the new fields requested, thus enabling automatic or manual fulfilment.
2. Issuing of new QR bills: The fields envisaged by the QR billing guidelines must be integrated into the new format, which will require several modifications in terms of formats and new information to be delivered.
3. Integration of QR functionality into online banking and mobile banking: The new standard in payment processing has a direct impact on online and mobile banking. Thanks to the integration of QR functionality into digital payments, it will be possible to initiate the automatic scanning and input of payment information on a laptop or mobile phone. The solution we offer to our client community for this requirement is referred to as the Avaloq Front Platform (AFP). However, the banks’ solution with other providers will also be analysed in order to find the best solution for the integration of this service. The project will be delivered based on the release plan and each client’s requirements.

Key dates

Q4 2019
Expected delivery of offers to clients

Q2 2020
Going live of the ASSL solution for managing QR bills

30 June 2020
Start of the transition period and introduction of QR billing


SIX Repo – new triparty agent (TPA)

Banks affected: CH banks part of the repo market
Mandatory effective date: Q3 2021
Solution status: Considered
Solution implementation date: Not defined


SIX has decided to introduce the triparty agent (TPA) for repo trading in order to bring collateral management closer to the trading activity. The aim of this initiative is to replace the current SECOM- and SIX-specific proprietary messages in order to adapt the messaging for repo transactions to the international standard.

SIX has set a new software stream (TPA) for collateral management outside SECOM, and any repo linked to a collateral management activity will be directed by the TPA into SECOM.

This new software stream is powered by the Collateral Cockpit, and the collateral management messages will be used to directly communicate the participant’s banking system.

The new platform provided by SIX (CO:RE) offers users the automated settlement of repo transactions.

CO:RE collateral management provides access to:
• bilateral OTC derivatives transaction cover
• collateral posting for centrally cleared transactions, including OTC derivatives etc.
• exposure cover arising from an array of transactions, ranging from fails lending, repo, SLB, ETDs, etc.
• exposure resulting from other transactions that require collateralization through tailor-made solutions.
The chart below represents on a high level the integration of the new CO:RE 

Image source:  SIX; SIX Securities Finance Renewal – Transition Guide Repo (PDF); Participant Transition Guidance

SIX has promoted a preliminary member test which requires the direct involvement of the banks, and all messages will be adapted to the new international standard within the next two years. The triparty member test includes preliminary tests which help to prepare stakeholders for the TPA project and to adapt to the new CO:RE platform.

Our approach

We are monitoring the developments of the triparty repo closely in order to define the impacts relevant to the banks in our client community. SIX published the technical documents in Q2 2019 and we will proceed with the technical analysis with the aim of integrating the new functionality into the Avaloq solution.

We have already supported our clients involved in the triparty member test for the preliminary testing of the messaging requested by SIX. The goal of this project is to adapt the current framework to the new TPA powered by SIX.

Key dates

Q4 2019
Expected finalization of the tests for the triparty member test

Q3 2020
Expected project start

Q3 2021
Expected end of the transitional period


LIBOR transition

Banks affected: all community banks
Mandatory effective date: 1 January 2022
Solution status: Considered
Solution implementation date: Wave 1 by Q4 2020


The UK’s Financial Conduct Authority (FCA) announced in July 2017 that it will not compel or persuade panel banks to make LIBOR submissions after the end of 2021. LIBOR rates exist for the following five currencies: USD, GBP, JPY, CHF and EUR. The home jurisdictions for each of these currencies have formed working groups to discuss and propose alternative reference rates.

The potential impact will be that for each currency a different concept may be implemented on how such rates are calculated, published and applied.
• USD: Alternative Reference Rates Committee (ARRC) proposed SOFR, the secured overnight financing rate
• GBP: Working Group on Sterling Risk-Free Reference Rates proposed SONIA, the reformed sterling overnight index average
• JPY: Study Group on Risk-Free Reference Rates proposed TONA, the Tokyo overnight average rate
• CHF: National Working Group on Swiss Franc Reference Rates proposed SARON, the Swiss average rate overnight
• EUR: Working Group on Risk-Free Reference Rates for the Euro Area proposed ESTER, the euro short-term rate

In December 2018, FINMA published a guide on the topic and on the risk of a potential LIBOR replacement.

The definition of the term structure is still being developed in most of the regions. The National Working Group (NWG) in Switzerland has made substantial progress on defining the alternative rate and suggesting the corresponding term structures. The group proposed a solution to calculate term rates based on the compounded SARON. This proposal is supported by research on feasibility comparing forward-looking (i.e. cash/derivatives-based) and compounded term rates.

Our approach

Avaloq is concentrating on operational readiness in order to deal with the new reference rates and their application. The areas potentially impacted are:
• credit and financing functionality (e.g. mortgages or loans linked to LIBOR)
• OTC traded instruments (e.g. IRS, cross-currency swaps)
• instruments (such as bonds) linked to LIBOR

To define the scope for this global initiative, which impacts our entire client community, we started from two main assumptions:
1. NWGs are moving at their own speed, so the degree of maturity of their work is different, and many details have still to be defined (not all the term structures have been defined yet).
2. The number of interest rate curves and products impacted varies from client to client.

Based on these assumptions, Avaloq decided to propose a step-by-step approach to its client community during the webinar held in October. This approach gives them the possibility to provide us with a list of the main IRCs and LIBOR-based products of interest to them. In this way, we can get an overall picture of the needs of the entire community, and this will help us to define the scope for Wave 1.

Key dates

October 2019
Introduction webinar

Q4 2019
Wave 1 package definition and binding feedback collection

Q4 2020
Expected implementation and date for going live with Wave 1 package solution


ESG (Environmental, Social and Governance)

Banks affected: EEA and Switzerland
Mandatory effective date: Q3 2020
Solution status: Considered
Solution implementation date: To be defined


Environmental, social and governance (ESG) investing, also known as sustainable investing, is a relatively new paradigm in the investment service area. Similar concepts have existed for many years (see responsible investing, green investing or ethical investing), but interest in sustainable, high-quality investments has recently skyrocketed.

Even though this counts for only a small part of the investment world, it is by far the fastest growing segment, with growth that was above 80% between 2017 and 2018. This fast-growing interest is based on different social, political and investment reasons.

While investing in high-grade sustainable products was seen in the past as favouring ethical or philosophical considerations over performance, the promoters of this kind of investment have since done an about-turn. Sustainable investing performs better (measured in terms of profitability on risk) than other investments of the same class, at least in the long term.

Avaloq sees the ESG requirements as a natural evolution of the investment service offering and has identified the provision of support for relationship managers/asset managers in banks and external asset managers (EAMs) as a key strategic direction. We are therefore currently working on integrating ESG aspects into the Wealth Management Front tool.

Our approach

What is envisioned by the industry and the regulators is the integration of sustainability criteria into the investment proposal offering. This has different aspects:
• Clients must be profiled for their sustainability preferences. For instance, clients may want to avoid investing in critical industries like animal production, fishing, uranium, tobacco, alcohol, weapons and gambling. Some clients may or may not want to go into this level of detail, or they might only want some general level of sustainability in their investment (ESG/sustainability synthetic rating above a certain threshold).
• The asset proposed must have the corresponding classifications in order to be matched against the client investment profiles. Normally, the classifications are set at issuer level, but it may be at issue level too (‘green bond’ for example). Global market data providers deliver this kind of data and calculate a synthetic rating of the issuer, similar to the credit rating of S&P, Fitch and Moody’s.
• The investment suitability rules must include in addition to the current logic, the logic for considering the match between a client’s profile and asset/issue classifications.

All this fit nicely into the Avaloq ISF (Investment Suitability Framework).
Avaloq will provide support for ESG/sustainability considerations in investment services within its wealth management offering following the approach above. This functionality will be delivered on all channels; digital channels will also deliver an excellent user experience for the wealth manager/asset manager role.

Key dates

Q3 2020
Adoption of regulations and delegated acts


SWXess Maintenance Release 8.1 (SMR 8.1)

Banks affected: CH banks
Mandatory effective date: 31 January 2020 – To be confirmed
Solution status: committed
Solution implementation date: by the end of January 2020 – To be confirmed


SIX has introduced a new maintenance release of its SWXess trading platform. The SWXess Maintenance Release 8.1 (SMR8.1) contains mandatory changes in the Swiss format for transaction reporting, implemented initially to fulfil the reporting obligation imposed by the Financial Market Infrastructure Act.

This new release includes both mandatory and optional changes. The mandatory changes mainly consist of:
• the addition of new fields to the report, such as ‘Venue Code’ or ‘Contra Firm Subtype Code’
• the removal of existing fields, mainly related to the discontinuation of the operation of EUREX Zürich, such as the ‘Series Version Number’
• the modification of existing fields, such as the ‘Exercise Price’ or the ‘Series Class Code’
• additional order validations in accordance with the fields added, deleted and modified, as described above
• modification in the way some information is reported, for example about the beneficial owner or the contra firm

On the other hand, some new optional functions have been proposed too, such as the possibility to automatically transmit the transaction report via Secure File Transfer Protocol (SFTP), upload and download the report during public holidays, and upload a new file, named ‘Underlying Report’, to be used as an alternative to the current reporting method for financial instruments with multiple underlyings (mainly for structured products).

From 28 October 2019, it will be possible to upload the new upgraded version of the transaction report, with a parallel phase running until 31 January 2020, in which both the current and the new version will be accepted. From February 2020 on, only the upgraded report will be supported. Meanwhile, the Swiss Banker Association has challenged SMR8.1 on the grounds of the required implementation. However there has been no official postponement; in case the deadline will be extended by SIX, this will most likely be until middle or end of April.

For the moment, ASSL will continue working on the assumption that 31 January 2020 remains the deadline.

Our approach

Avaloq released a kernel solution and is currently working on the required customization. All banks impacted have been informed of this in an official client communication describing the main characteristics of this change.

In order to support the community, Avaloq has committed to covering the costs of the project for the entire community.

Key dates

30 September 2019
Latest publication of the detailed document from SIX (Participant Readiness – Version 3.00)

October 2019
Start of development to implement SMR 8.1

31 January 2020
End of parallel phase that supports both versions of the report