It is of strategic importance to ensure that Swiss financial service providers have access to foreign markets so that the Swiss financial sector can remain competitive.
Preserving a significant share of value creation and jobs in Switzerland depends in part on the extent to which the country’s banks can succeed in asserting its position as one of the leading global financial centres going forward. Switzerland will not be able to safeguard and improve market access by acting alone. Safeguarding and improving market access also requires a political understanding with the various partner states. A range of approaches should be pursued simultaneously to this end, since some goals can be attainable quite quickly, whereas others will require more time.
There are three types of market access:
- Onshore presence: A Swiss bank serves its foreign customers through a subsidiary and/or branch in their home country.
- Active cross-border: Staff based in Switzerland serve existing foreign customers and actively acquire new ones.
- Passive cross-border: Existing foreign customers receive standard services and new customers are acquired on their own initiative.
Why is market access important?
- Private banking: More than half of the assets managed in Switzerland originate from foreign customers, with Europeans estimated to account for more than 40% of these assets.
- Asset management: Swiss banks can manage foreign collective investment schemes, provide institutional asset management for foreign pension funds and sell Swiss financial products abroad .
- Corporate banking: Currency transactions as well as bond and equity issues abroad are easier for Swiss banks.
Goal: secure non-discriminatory access to foreign markets
Switzerland is striving to secure non-discriminatory access to EU/EEA markets as well as to growth regions in order to preserve its ability to export Swiss financial services and foster future growth.
What does the banking sector need?
In contrast to goods-exporting industries, restrictions on market access are increasingly hampering export-oriented Swiss banks’ efforts to meet legitimate customer needs and keep value creation, jobs and tax income in Switzerland. Unlike Switzerland, key target markets have in recent years adopted protectionist measures which severely restrict cross-border financial transactions. Customers’ needs have also changed significantly. Whereas the focus in the past was primarily on keeping assets safe in a reliable jurisdiction and ensuring confidentiality, customers today are increasingly looking for active and performance-oriented services. Both personal contact with client advisors and interaction through new means of communication are important aspects of this. Many studies show that international wealth management remains a growth business. Without regulated market access, Swiss banks are at a significant competitive disadvantage compared with their rivals in the EU. Market access is just as essential for the finance industry as it is for the watch, engineering or wine industries. It is therefore not merely “nice to have” but rather a clear necessity if Switzerland and its financial industry are to grasp the opportunities that lie ahead.
To achieve improved market access, the sector has in the past pursued a number of mutually independent approaches:
- Bilateral agreements: Bilateral agreements allow for improvements to market access with individual, strategically important EU countries. To date, Switzerland has reached an agreement with Germany on a simplified exemption procedure. In addition, negotiations are currently underway on an agreement with the United Kingdom, which aims to improve market access for Swiss banks in the UK.
- Equivalence strategy: Key elements of Swiss financial market regulation are recognised as equivalent to EU regulations. However, the relevant recognition procedures are currently one-sided, inefficient and, in some cases, heavily politicised. In addition, the scope of the existing EU third-country equivalence regime is restricted to certain activities, customer categories (professional customers) and products. Therefore, the EU regime cannot cover the needs of the Swiss banks’ cross-border business with private customers, even if it was more efficient and depoliticized. However, Luxembourg has set an interesting precedent as regards cross-border business with professional customers, having deemed Swiss financial market regulation and supervision to be equivalent under its national regime in June 2020.
- Financial Services Agreements (FSAs): A financial services agreement would cover the entire Swiss financial sector, including insurance. In addition, a far-reaching adaptation of Swiss financial market law to EU regulations is an essential component of the FDLA in the traditional sense.
- Onshore presence in EU countries: A number of Swiss banks have established subsidiaries in the EU. Nevertheless, EU customers continue to be primarily interested in receiving cross-border services provided from Switzerland.
Due to external dependencies and internal preferences, it has not yet been possible to achieve the desired progress with the approaches mentioned. Above all, for the banking industry it is not only a matter of further developing Switzerland's bilateral path, but also of opening it up. In concrete terms, practicable market access solutions that cover banking, wealth management and investment advisory services are required. The industry has therefore intensified the banks' concern to open up market access to the EU and brought it to the level of the Federal Council. The Federal Council’s report of December 2020 on its policy for a future-proof Swiss financial centre (Section “Improving the exportability of financial services”) addresses these concerns, too. Also in the European paper of economiesuisse of January 2022, the banks were listed as one of 4 priority economic sectors for which solutions are required within 2 years.
The sector is currently focusing on the following approaches:
- The existing procedures for recognising equivalence in the financial sector should be put on a stable and reliable foundation, depoliticised, and addressed and settled swiftly.
- In parallel to this, improvements in the current equivalence regime should be targeted.
- Practicable market access solutions must be found, both at the EU level and bilaterally with individual Member States. The Swiss banking industry is united behind the concept of the "institution-specific” approach, which should open up market access to the EU for interested institutions based on registration with the EU supervisory authorities.
- An actual FSA is not currently an area of focus for the banking sector.
Free trade agreements and the Swiss financial centre
The SBA is committed to open markets because trade creates prosperity both in Switzerland and abroad. The Association therefore also supports the conclusion of free trade agreements, which are a key instrument of Swiss foreign trade policy.
Free trade agreements are important to the Swiss financial centre for the following reasons:
- They enhance the competitiveness of the Swiss economy.
- They open up new growth opportunities for our companies’ exports.
- Closer business ties create the potential for new agreements on financial services.
Free trade agreements make Switzerland more competitive and prosperous over the long term, benefiting the country’s people and economy as well as its financial centre.