Can the Swiss Financial Center continue to grow? Yes, says Marcel Rohner!

 

When you took office at the Swiss Bankers Association you communicated one
clear goal: To ensure that the Swiss Financial Center grows. How can this be
achieved? 

When we ask ourselves “how does it grow?” one way is from a macroeconomic point of
view: We grow when the Swiss economy grows. We grow when we branch out into new
fields, businesses, and services. We also grow if we export more of our services to the
rest of the world, which is important. So when we look at these three things we have to
ask ourselves what can location policy contribute to create an environment that fosters
growth? And there are a number of aspects. One is that we need to ensure that we
operate in a highly competitive environment. A competitive environment is one that
fosters innovation, and innovation is a driver of growth according to the three areas I
just mentioned. We can export more, we can do more business within Switzerland. So
this is important. This means we should have as low entry barriers into our industry as
possible, which means we need a proportionate regulation but also need to be open to
new services such as open banking, where we have a break up of a value chain, which
clearly increases competition, and makes life more challenging, but ultimately
contributes to a competitive environment.

So there is more regulation. For Swiss banks, are these regulations still
proportionate if you think about growth?

Well, you clearly would have diverging views from those banks who are, by their
business model, very active internationally. These obviously are large banks, which
have a very global and complex business model, but also all the asset managers and
private banks, which serve a client base all around the world. For a bank that is
exclusively active in the domestic market, one or the other part of the regulation might
look slightly over the top or too much of a burden, which is why our regulator has
actually introduced a differentiating regulatory regime within Switzerland, while at the
same time ensuring that we have obviously one consistent regulation for our financial
markets in Switzerland. We are, after all, one financial center here and not two, and this
is a balance that we always have to strike. Being seen as equivalent, as serious, as
reliable from the outside but also reasonable with the perspective of what the goal of a
regulation is in its application internally, that’s a continuous challenge, which I think we
have so far met quite well.

Switzerland has no stock exchange equivalence with its neighbor, the European
Union. How does the Swiss Financial Center deal with that?

I think we have actually dealt with it quite well. We—or I should say, our
government—has basically reacted to the non-acknowledgement of equivalence by the
EU by reciprocating the whole thing and saying, “if we can’t, you can’t either.” And in the
end, I think that was a fair and appropriate reaction, and it ultimately led to the fact that
the volumes even went up. At the time, we could go with that. Although we still think that
this decision was entirely political, we understand that the equivalence has already been
accepted and agreed by all the member states. It was a last-minute decision in the
context of broader negotiation not to grant this equivalence to Switzerland, which we
regret, and hopefully it will be revised at some point in time in the future. And we think
when we look at our infrastructure, at our regulations around the exchange, this is
obviously not really distinguishable in any material sense from what’s going on in the
European Union.

And what role might other financial centers outside the EU play here in
Switzerland?

There are two or three other places in the world that do a lot of the same business as
we do here in Switzerland. First and foremost, is the UK. It’s the largest asset
management center in the world for institutional asset managers. It’s also the largest
offshore financial center in the world. So it is in a sense a competitor but as always with
our friendly competitors they have the same interest toward the rest of the world as we
have. But I think, particularly in the UK, they share very much the same principles and
views on market access, and that’s why our government is in a very intense
equivalence negotiation phase with the UK. This will be an important proof-of-concept,
which will grant us mutual market access and as always this increases competition but
will ultimately be beneficial for both of us in the long-term. Singapore is another center
that has essentially a very similar business model as Switzerland, and I could imagine
that closer cooperation would make a lot of sense with such a financial center as well.

 

The industry is also facing massive technological shifts. Digitalization is a
challenge. Is the Swiss Financial Center as well as banks prepared for this?

I think we are. To begin with, the Swiss financial infrastructure is probably one of the
most highly developed in the world. We have a super fast, reliable payment system
infrastructure. We have a fully integrated exchange. The banks have been on a
technological innovation path for the last 30 years. So in that sense, digitalization is not
something entirely new. There are just new opportunities emerging now because the
infrastructure is so much more powerful. The internet and everything that comes with
it—AI, Big Data, all the opportunities and possibilities that emerge from these new
developments and innovations—create opportunities for new competitors.They also
create opportunities for the banks. The way a bank can interact with a client today is
obviously much more flexible than it was 30 years ago. The virtual office, a video
interaction with portfolio analysis on the side, is an example of how a bank can serve
the customers much better. But there are also other things, like open banking, a split of
the value chain, certain competitors that engage in a very specific field of the value
chain, be it reporting, be it accounting, be it client identification, you name it. And then
this offers the banks the opportunity to outsource certain parts of the value chain. So
clearly, these innovative steps create business opportunities much more than they are a
threat. At the same time, of course, having these neo banks coming in, such as Revolut
and N26, creates new competition, and it forces the incumbents to react to these
challenges by offering their services in a more client-friendly way.

The Swiss Federal Councilor wants the Swiss Financial Center to become the
greenest and the most sustainable in the world, to make a clear contribution to
society and the environment, and to be a credible location for investors. So what
does this mean for banks?

For us banks, this is primarily an opportunity, but it’s also a commitment for us. The
demand comes from all our clients, both internationally and domestically, from
institutional clients and private clients. They do want to invest their assets in a
sustainable way. They want to make sure that they are invested in a way that is
consistent with their values or their sustainability objectives, and that’s where I see a
bright future for the Financial Center. Imagine if more and more people globally realize
that this is the place where you have the broadest offering of sustainability products,
where you have the easiest access to very specific ways on how you want to invest
sustainably, and where you find the experts who can competently advise you on
sustainable investing. Then this Financial Center will grow. It will grow because more
and more funds globally flow into Switzerland and are invested in a meaningful,
sustainable way. And this is where we see our biggest contribution.