“Politicians need to respect the golden rule”

Martin Hess, let’s start with the issue that dominated the agenda in 2024: the stability of the Swiss financial centre. Where do you think things stand as 2025 draws to a close?

Martin Hess: The banks have once again demonstrated their robustness. Assets under management have probably reached a new record to follow last year’s high, underscoring the continued confidence in the financial centre. Swiss banks are well capitalised across the board and comfortably satisfy the strict requirements. However, if banks are to fulfil their economic functions, it is vital for them to be competitive. We must avoid burdening them with a never-ending stream of overregulation that makes it vastly more difficult to do business than it is for their foreign competitors and companies that are subject only to light-touch regulation. Outside Switzerland, there’s been a recognition that the screw had probably been tightened too far.

There’s no escaping the debate about the future shape of the financial centre, and especially the structure and capital underpinning of the remaining big bank. Is Switzerland still dependent on a global financial actor of that size?

Switzerland owes its prosperity to the financial sector, which is a key pillar of the economy. As in every other major sector in Switzerland, we at the banks are reliant on global actors. Today especially, domestic players are central to Switzerland’s export industry and access to international capital markets for smaller institutions. As regards the risks of large corporations, it’s absolutely clear that the state can no longer be expected to pick up the tab. A blanket demand for stricter capital requirements as a broad-spectrum antibiotic may calm a few nerves, but it won’t bolster resilience in the way that is hoped. That can be better achieved by closing clearly identified gaps, for example in liquidity provision and accountability.

One stand-out feature of this year has been the SNB’s rapid return to zero interest rates. What is the SBA’s assessment of that move?

The SNB decided to introduce zero interest rates back in June. Given the current geopolitical tensions, muted inflation expectations, the continuing strength of the Swiss franc and the mixed economic trend, that was an understandable step to take. At the same time, though, it must be acknowledged that a zero interest rate environment hampers responsible saving and puts further pressure on the pension system. The banks are shouldering a considerable part of the monetary policy burden through increased pressure on margins in the lending business. That burden then has to be borne by their customers, meaning they have less money left over at the end of the month.

We’ve seen a new face in a top role. Martin Schlegel has raised a few eyebrows in his first year as SNB Chairman. What is your assessment of his initial twelve months?

Mr Schlegel has been responsible for some changes of tone in his first year, but he hasn’t reinterpreted the SNB’s principal mandate of price stability. The speed with which the era of positive interest rates – which only started in September 2022 – came to an end was undoubtedly striking. We’ve been back at zero since June.

What have you noticed in particular?

From the economic perspective, two points. First, the clear stance on negative interest rates. Martin Schlegel stressed in June that the bar to reintroducing negative rates was higher than for cutting rates when they were in positive territory. That sends an important signal to savers and pension funds. Second, we’re seeing noticeable efforts by the SNB to increase transparency, such as the announcement that it would publish summaries of monetary policy discussions. It’s intended to help markets better understand the rationale for decisions.

Turning to innovation, you were one of the jury members voting for “AI fever” as the finance word of the year. But aside from AI, where are we with the digital franc?

AI fever is infectious, and the financial sector is not immune, even though the discussions have got a little out of hand at times.

On the currency issue, Switzerland today has a payment system that works extremely well. We’re currently laying the groundwork for future viability. Programmable, blockchain-based means of payment are intended to facilitate new business models and increase the efficiency of the financial system.

A central element of that is the deposit token: a digital Swiss franc issued by commercial banks. In September, we demonstrated (Payments: a milestone for the deposit token, article in German) that it is totally feasible. That is the Swiss way: we’re making the existing franc ready for the digital economy. Not only deposits but also cash can be brought onto the blockchain. The Federal Council shares that view. The consultation is currently under way on a new draft law designed to permit the legally compliant issuance of stablecoins in Switzerland. I believe that Switzerland, as a global leader in innovation and major financial centre, needs a first-rate framework to keep all its options open for the future.

Staying with the future, will AI fever subside in 2026 or is it just getting started?

In 2025, AI fever has driven efficiency gains that have already become visible in the labour market. The question of how banks can add value for their customers is one that will preoccupy us for a long time to come. But essentially, what’s at stake now is the transition from feverish euphoria to productive application. For us, AI isn’t an end in itself. It’s a tool that can handle large volumes of complex data in risk management and allows customer advice to be individualised. The crucial moment will come when the fever subsides and the technology becomes a new industry standard for banks.

One final question: after a year of consolidation and a monetary policy turnaround, what are your main expectations and hopes for the Swiss banking centre in 2026?

I expect the economic environment in 2026 to be demanding. The biggest challenge will be to safeguard the earnings base in an environment of zero interest rates and a sluggish economy, while at the same time defending competitiveness against international rivals.

My main hope is that political decision-makers will respect the golden rule: no regulation that doesn’t pass the competitiveness test. Ten years ago, in a publication that attracted wide attention, the Swiss Bankers Association set out what makes good regulation: it has to be effective at resolving clearly identified problems expediently and in the way intended. Tightening up banking stability regulation across the board won’t address the challenges: it will merely weaken the banks. We need to consolidate our reputation as a financial centre that is stable, innovative and internationally competitive.