Relevance of the topic for SZKB and its objectives

Complying with regulations and fostering healthy growth that aligns with SZKB’s risk profile are essential for maintaining SZKB’s impeccable reputation. Responsible business conduct in and towards the financial sector has an impact on various sustainability issues, such as the environment, society and the economy.

• Inside-out – the impact of SZKB on the financial sector: SZKB influences environmental and social standards in the financial sector through its financing decisions. Supporting companies that meet sustainable criteria helps bolster trust in SZKB and achieve long-term economic stability. At the same time, there is a risk that the provision of financing to companies that do not comply with environmental regulations or social standards may result in reputational damage, regulatory consequences or financial losses.

• Outside-in – the impact of external factors on SZKB: External factors such as regulatory changes, climatic risks, societal expectations and environmental changes affect SZKB’s business activities. Companies that are slow to adapt to new requirements can become more difficult to finance, increasing the risk of default and associated financial burdens for the Bank. Moreover, there is a risk of reputational damage or regulatory consequences in the event of non-compliance with regulatory requirements. Proactive risk management is therefore central to recognising any such developments at an early stage and strengthening the resilience of SZKB as well as its clients.

Responsible action helps to meet regulatory requirements, protect the Bank’s reputation and gain the trust of clients and society. This fosters not only sustainable growth but also financial sector stability for SZKB. For these reasons, «regulatory compliance», «reputation» and «healthy growth» are key topics for SZKB in terms of responsible business conduct vis-à-vis the financial sector. SZKB has not defined any specific targets in terms of responsible business conduct vis-à-vis the financial sector.

SZKB has not defined any specific targets in terms of responsible business conduct vis-à-vis the financial sector.

Management approach

Compliance management system

At SZKB, corporate governance requirements are implemented through regulations and directives. These are updated as part of a review process. In addition, compliance with corporate governance requirements and directives is ensured by means of risk management processes and the internal control system (ICS) and is verified by internal (Board of Inspectors) and external bodies (external auditor, FINMA).

The «Code of Conduct of Schwyzer Kantonalbank» outlines the fundamental principles necessary for successful and responsible business conduct at SZKB. This Code is issued by the Bank Council of SZKB and is applicable to all employees and governing bodies of the Bank. The Code of Conduct is available to the public. It aims to promote the corporate and compliance culture within SZKB and outlines the key rules of conduct that must be followed by all employees.

Ethics and the anchoring of ethical principles are ensured by the SZKB Code of Conduct as well as by the obligation for all employees to comply with regulations and internal requirements. SZKB establishes the responsibilities of the Compliance function and other business areas in the internal directive on «Compliance (adherence to standards)» and stipulates reporting obligations in relation to incidents.

Whistleblowing

SZKB has established a reporting office to which employees and third parties, such as clients and suppliers, can report misconduct at any time by e-mail or in writing. Related information is made available to the public at www.szkb.ch. Information can also be provided anonymously and will be treated confidentially unless there is a legal obligation to disclose it. Provided that reports are submitted in good faith, SZKB will protect employees who report wrongdoing from any related sanctions. The handling of information received is governed by the «Whistleblowing Policy» issued by the Bank Council of SZKB, which is available internally.

Employees or third parties can also reach SZKB via public channels or contact other bodies such as the Banking Ombudsman or the Swiss Financial Market Supervisory Authority FINMA 1.

¹ The Swiss Banking Ombudsman operates as a source of information and a mediation body, without any judicial authority, for clients of member institutions of the Swiss Bankers Association (banking and financial service providers) as well as other institutions affiliated with the Swiss Bankers Association for this purpose.

Compliance with market conduct rules

In the internal directive on «Market Conduct Rules», SZKB specifies the statutory provisions on compliance with market conduct rules and the relevant requirements of the supervisory authority. In order to avoid market abuse, guarantee the transparency and proper functioning of the securities markets and ensure equal treatment of investors, trading in securities should only take place on the basis of generally accessible or published information. The exploitation of insider information and market manipulation is prohibited.

Managing conflicts of interest

SZKB complies with the requirements of the Swiss Criminal Code on corruption (bribery, granting of benefits, acceptance of benefits) and clearly rejects bribery and corruption. It has also adopted internal regulations on conflicts of interest and the management of conflicts of interest, which have been approved by the Bank Council. This document describes in detail the forms that conflicts of interest can take, as well as what amounts to bribery and corruption, and establishes a monitoring mechanism to be operated by the Chief Compliance Officer.

Combatting money laundering

There is an internal directive at SZKB on «Combatting Money Laundering (AMLA, AMLO-FINMA) and Specification of Due Diligence Obligations (CDB)». It defines the processes for preventing money laundering, responsibilities and the dedicated anti-money laundering unit. In all areas of business, SZKB does not accept employees engaging in illegal conduct or violating internal policies. In addition, SZKB uses databases (e.g. Dow Jones) to combat corruption and money laundering by identifying high-risk individuals and organisations. Both transactions and new clients are reviewed. If there is any suspicion of illegal activities such as money laundering, terrorism or corruption, this will be reported to the competent authorities. Audits and controls by supervisors, second-line units (in particular by Risk Management and the Compliance function) and the risk-based approach of the internal and external auditors ensure that the requirements are met.

Prevention of tax evasion

SZKB does not provide any tax advisory services in connection with investment advice, asset management, M&A or offshore domiciling. As a member of the Swiss Bankers Association, SZKB fulfils the obligations arising from the Agreement on the Swiss banks’ code of conduct with regard to the exercise of due diligence. Detailed provisions are stipulated in binding directives. Clients are evaluated with regard to the existence of qualified tax offences, and the tax compliance information they provide is checked. SZKB holds the FATCA status «Registered Deemed Compliant FFI – Local FFI» and implements the relevant restrictive FATCA rules with the support of an independent specialised consulting firm in some respects. In accordance with the applicable statutory provisions, SZKB strictly refuses to provide any active support for capital flight, tax evasion or similar actions. This ban has been firmly anchored in SZKB’s principles for many years.

As an independent institution operating under cantonal public law, SZKB is not subject to direct taxes on profits and capital at the federal, cantonal or municipal levels. The interest on the endowment capital provided by the Canton of Schwyz and the settlement of the state guarantee are based on the provisions of the publicly available «Law on the Schwyzer Kantonalbank».

Due diligence in the supply chain

SZKB has a «Third-Party Management» directive that governs procurement, contract and partner management. On this basis, SZKB has implemented risk-appropriate measures to ensure compliance with its duties of due diligence and transparency with regard to minerals and metals from conflict regions and child labour:

• Due diligence and transparency with regard to conflict minerals: Confirmation from the counterparties for gold (Good Delivery Rules of the London Bullion Market Association (LBMA) is obtained and documented annually.
• Due diligence and transparency with regard to child labour: An ESG risk assessment, including the risk of child labour, is carried out annually with suppliers, covering the entire supply chain identifiable through financial accounting. Suppliers considered to be high-risk must sign the SZKB sustainability agreement or an equivalent confirmation. In this document, the contracting parties confirm that their products and services comply with applicable regulations, laws and standards, such as those of the International Labour Organization (ILO) or the applicable standards in the countries in which they operate. All items distributed, such as cards, giveaways, and the like, must be manufactured in a country classified by UNICEF in its Children’s Rights in the Workplace Index¹ as «Basic». Otherwise, the supplier must sign the SZKB sustainability agreement or submit an equivalent confirmation.
• Supply chain management: SZKB has implemented the defined due diligence processes within the supply chain. Based on the results of the ESG risk analysis covering the relevant supplier relationships, the areas of operations and administration, facility management, IT and technical services, as well as marketing and client retention, have been identified as potentially risky. Appropriate action has been taken in these areas. Employees with procurement tasks, especially in high-risk areas, receive targeted awareness training.
  

With regard to procurement activities, SZKB adheres to the following principles, among others: product-specific requirements, transparency and partnership-based cooperation, social compatibility, respect for human rights, environmental compatibility and cost-effectiveness.

Key measures

• Ensuring ethical business conduct
• Fostering sustainable development

¹Available at www.childrensrightsatlas.org (only in English)

Ensuring ethical business conduct

SZKB has an independent Board of Inspectors, which reports to the Bank Council and performs the audit and monitoring tasks assigned to it in an independent manner. The Board of Inspectors is an independent entity and reports to the Audit Committee with regard to technical aspects but is answerable to the Chairperson of the Bank Council. Ethical incidents are duly escalated and reported to the Audit Committee or directly to the Chairperson of the Bank Council. The Board of Inspectors focuses its work on the binding elements of the International Standards for Professional Practice adopted by the IIA (Institute of Internal Auditors), that is, Global Internal Audit Standards (GIAS) and topical requirements, as well as the qualitative requirements of IIA Switzerland. The aim of the Board of Inspectors is to strengthen, protect and preserve the Bank’s ability to create value by providing the Bank Council and the Executive Board with independent, risk-based and objective auditing certainty, advice, insights and perspective. The Board of Inspectors conducts a comprehensive risk assessment of the Bank at least once a year, taking due account of external developments and internal factors. Based on this analysis, the Board of Inspectors carries out audit planning using a riskbased approach. All areas are audited at least once every five years. Examinations relating to fraud and business ethics are integral components of the audits. In addition, an annual audit is carried out by the external auditor based on a questionnaire on fraud and business ethics. By applying the three-line model of the IIA, SZKB ensures that responsible and ethical business conduct is engaged in at SZKB by implementing various protection and control mechanisms within processes or through the ICS.

Regular checks and audits by operational or controlling units, as well as the independent unit of the Board of Inspectors, have put in place numerous safeguards designed to protect the Bank from unethical business conduct. Ethical business conduct can be reflected by the Bank’s healthy growth and the reduction of reputational risks, as responsible and ethical action is a key element of the decision-making process.

Fostering sustainable development

For SZKB, healthy growth means balancing economic success with environmental and social responsibility. The aim is to achieve a balanced combination of long-term stability innovation and sustainable value creation. Healthy growth results from various measures adopted within the framework of the corporate and sustainability strategy. There are no stand-alone measures or objectives in this regard.

Minimising reputational risks

SZKB’s reputation is a key component of its sustainability strategy and is largely responsible for its long-term success. The trust of clients, employees, business partners and the general public is earned through consistent transparency, reliability and responsible action. By launching new processes, such as the due diligence process in procurement, SZKB sets internal standards and minimises its reputational risks.

SZKB integrates ESG risk drivers into its bank-wide risk management system. As a result, the impact of a risk on its reputation is systematically assessed and, if necessary, minimised through appropriate action.

Assessment of effectiveness

The action taken to ensure ethical business conduct has been particularly effective. SZKB has a strong control and monitoring body in the form of the independent inspectorate, which reports directly to the Bank Council. Regular riskbased audits, as well as the integration of fraud and ethical issues into internal and external audits, ensure continuous review of the integrity of business conduct. The three-line model of IIA also ensures a clear distinction between responsibilities and increases the effectiveness of internal control mechanisms.

Implementing these structures strengthens trust in the organisation, reduces reputational risks and fosters stable, healthy growth. Ethical business conduct is firmly embedded in the Bank’s management and control system and measurably contributes to the long-term stability and credibility of SZKB.

SZKB considers the measures taken to be appropriate and effective.

Further development and next steps

To ensure that it continues to meet all regulatory requirements in future, the Bank uses a regulatory radar scheme to proactively monitor current developments. Requirements in regard to sustainability (including those relating to greenwashing) are also taken into account. The Executive Board regularly reviews and discusses the regulatory radar. Any necessary internal bank adjustments are made on the basis of this work.

The Board of Inspectors has already conducted ESG reviews in the past. With ESG becoming increasingly integrated into business processes and with regulatory requirements increasing, the issue of ESG will continue to be an integral part of the auditing activities of the Board of Inspectors in the coming years.