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| Media conference on 13 September 2001 |
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Report from Headquarters
Dr. Urs Ph. Roth, CEO and Delegate of the Board of Directors, Swiss Bankers Association
Ladies and Gentlemen
Some of you present are no doubt familiar with the golden "3-6-3" rule of years
gone by, whereby a banker's daily business ran as follows: borrow money at 3%; lend it at
6%; and be on the golf course by 3 o'clock. As we are all well aware, however, times
change, and banking too has moved with the times. More and more clients are accessing
capital markets directly, making refinancing more of a challenge for the banks; banks are
increasingly focusing on fee and commission income; the banking and insurance sectors are
converging more and more, and so on. There are a dozen other such developments I could
mention at this point. These changes have served to increase the complexity of the banking
business, with the result that action has to be taken in many different areas. I would
like to focus on three of these areas:
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First, the New Basel Capital Accord, the revision of which is a direct result of new developments in banking. The old requirements, which reflected the nature of the banking business 13 years ago, had reached a stage where they were no longer suited to depicting the risk reality of a bank today. |
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Second, requirements are changing in the area of training, too. There has been a veritable explosion in both the quantity and quality of knowledge required over recent years, and training courses have to adjust to this new reality. Against such a backdrop, the Swiss Bankers Association is committed to continuing to play an active role in training and even to intensify the role it plays in executive training. |
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Lastly, communications strategies must also be reshaped to reflect the new reality. The international dimension of banking means that communication too must have an international dimension. I would therefore like to use this opportunity to set out the main thrusts of our new communications strategy. |
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New Basel Capital Accord - third round of consultation necessary
The first major undertaking currently facing the banking sector is the revision of capital
adequacy requirements. In January this year, the Basel Committee invited comments on its
second consultative package encompassing more than 600 pages. The original
timetable envisaged enforcing the new requirements by the beginning of 2004. Given the
extensive comments received, however, the Basel Committee has decided to postpone this
ambitious timetable by one year. The third round of consultation is thus planned for the
beginning of 2002, with the new proposal being implemented at the beginning of 2005. The
Swiss Bankers Association (SBA) welcomes the Basel Committee's decision, since a number of
issues are still unresolved.
In terms of content, the proposed New Basel Accord is based on a concept made up of three
mutually reinforcing pillars. The first pillar covers minimum capital requirements for
banks. Two main changes to the existing system are foreseen: first, a more risksensitive
element should be incorporated into credit risk requirements and, at the same time,
procedures should be clearly specified for the use of new and innovative credit risk
products such as assetbacked securities. Second, additional capital requirements for
covering operational risks should be defined. While the first pillar pertains to minimum
requirements, the second pillar makes it possible for supervisory bodies to demand capital
ratios higher than the minimum regulatory levels. Similarly, this second pillar would give
the supervisory authorities the means to intervene in a preventative capacity early on.
The third and last pillar involves increasing market discipline. This will be achieved in
particular through new disclosure requirements.
The Swiss Bank Association submitted its comments to the Basel Committee at the end of
May. Let me summarise our position in four main points.
First, we recognise the basic need for a new accord on capital requirements. We also
welcome the "menu-driven approach", which gives financial institutions greater
scope in the options open to them. It is based on the recognition that the risk management
requirements of a big bank are not the same as those of a local
"Raiffeisenbank". Nonetheless, implementation costs have risen to extremely high
levels, particularly for the smaller banks, and are set to rise even further with the
introduction of new capital adequacy requirements. It should also be noted that the new
capital adequacy requirements may have a structural impact - not all banks will be able to
benefit from potential reductions in terms of credit risk, while the new requirements for
operational risks will affect all banks.
Our second point is that we have some reservations regarding the objective of the
revision, which does not aim to reduce the overall amount of capital available in the
banking system at the present time. We believe this is the wrong approach and contend that
the capital structure should be sufficient to cover the risk considerations actually faced
by the banking system. In other words, capital adequacy for the banks should not be
determined by an arbitrary definition made 13 years ago but instead based on the risks
taken on by the banking system. This is not the case for two major business areas in
Switzerland: mortgage and collateral lending. For example, risk weightings for residential
properties appear to be unfairly high, with too few distinctions made between the various
types. This situation is in the interests of neither the banks nor their clients, since it
tends to fuel higher costs, hence higher mortgage rates.
Our third point is that it is unclear just how far the considerable scope left open by the
supervisory authorities as part of the second pillar will lead to different solutions at a
national level. A check must be put in place to ensure that varying interpretations of
this somewhat opaque ruling do not give rise to distortions in competition. We also
criticise the fact that only banks are subject to such stringent requirements. Those of
you who remember the LTCM affair know that it is not only banks that can spark systemic
crises. Precisely in a time when specialised financial intermediaries are competing more
and more with the banks, ample account must be taken of the impact of capital adequacy
requirements on competition.
We also note that the Basel Committee's use of the term "operational risk" is
still extremely unclear. Furthermore, we consider the requirements for
operational risks being cited at the moment as being too high, all the more so since not
all US banks have to comply with requirements on this scale. This does not mean that the
Swiss Bankers Association takes a fundamentally negative view of measures to ensure
moderate cover for operational risks. However, a closer look will have to be taken at
calibration methods, the impact on competition and the issue of structural shifts.
Naturally, we will continue to follow developments closely. We assume that, nearer the
time, the Federal Banking Commission will set up a joint task force for the national
implementation of the new accord and that the Swiss Bankers Association will be part of
endeavours in this area.
Training
The new challenges we are facing do not apply solely to our regulatory framework. It is
becoming increasingly difficult to train professional bankers capable of dealing with the
new aspects of banking today. The SBA has to take this fact into account in its training
activities. We do this on several levels:
First, the current reform of basic commercial training is of fundamental importance. Each year, around 1,500 young people embark on their
training periods at banks. Since they are the bankers of tomorrow, we need to ensure that
they receive first-class training. Thus basic education is undergoing some important
changes. For example, methodical and social skills should be fostered in
addition to purely academic knowledge. Together with our member banks, we are committed to
enhancing the quality of training by, for example, gearing course content to new
developments in banking as well as raising the profile of front-line training.
Next, the SBA is offering certification of access programmes for high school graduates. These programmes are specially designed for high school graduates who prefer
to enter the profession directly rather than after a course of study. These programmes
will likewise be subject to continual development. Through these measures, we can be sure
that, in a very short time, we will be able to offer a uniform diploma for these bank and
financial training programs. This will serve to increase the appeal of these channels even
further.
Third, our Association is similarly active in the area of further vocational training. This primarily concerns the SBA's involvement together with the Insurance Association as
sponsor of modular and advance examinations in banking, insurance and financial planning.
The involvement of both the banking and insurance side shows the extent to which training
is geared to an all-round understanding of the financial services industry. This is a
reaction to developments in a market where the importance of bancassurance groups is
growing and where clients expect advisors to be able to handle all aspects relating to
their assets and wealth. The modular structure has two advantages. It ensures that
training content reflects what is happening in the industry. It also ensures that there
are sufficient generalists with first-rate financial skills working in the banking
environment.
Recently, we have also been focusing on a fourth area, colleges and universities. Universities in particular are of considerable interest to the financial industry. A
world-class financial centre must have first-rate training courses encompassing a global
dimension. World-beating training is a vital element for the competitiveness of
Switzerland as a financial centre. One consequence of this is that Swiss universities will
have to attract a leading teaching corps from around the world for the training of its
financial specialists. Our understanding of the term "financial market
specialist" is very broad, including areas such as financial market legislation and
mathematics that also play a role in banking and financial market theory.
As a first step, our Association - working together with the State Secretariat for
Economic Affairs (seco) and the University of Zurich - carried out some comprehensive
stock-taking with regard to what is offered today by colleges and universities in the area
of financial studies. At the beginning of September, leading representatives of the
government, financial sector and universities discussed the need for action. Starting
points were identified in various areas, for example:
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Adaptation of educational structures of Swiss colleges within the framework of European coordination efforts (Fast transition to two-stage study cycle with Bachelor and Masters degrees in accordance with the 1999 Bologna Declaration) |
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Coordination resp. concentration of postgraduate courses offered |
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Strengthening resp. extension of applied empirical research |
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A strengthened focusing of content on key issues with universities cooperating with the financial industry |
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Adaptation of framework conditions (universities, job market for foreign students resp. graduates |
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Our intention is to have a clear vision of strategy and the direction in which we should
go by the beginning of 2002 by carrying out a comprehensive analysis of needs and
structures.
Training resources and materials have after all become a very important part of our work. Our latest product is
"Banking Today", a multimedia resource structured on the basis of the latest
findings in teaching theory and which also incorporates Internet-based teaching methods.
For example, students can download updates and comprehensive case studies from the Web and
can study whenever and wherever suits them best. In the press pack you will find a special
directory with an overview of our comprehensive list of publications.
Communication
Like you, we too face the challenge of how to communicate complex issues in a way that is
easily understood. What can't be said in two sentences tends to be overlooked and is
generally not particularly good in the first place. This is true too for the
SBA's communication strategy. One of the most important changes of the past few years is
the increasing globalisation of the banking business. This has naturally resulted in
changes in our communication activities. I would like to use this opportunity to set out
some of the considerations behind our communications strategy. Jean-Marc Felix will
address this issue in greater detail later on, in particular with regard to our new
corporate design.
When I was elected CEO of the SBA, one of my stated aims was that I would establish an
open and critical dialogue with you and all of our other stakeholder groups and not simply
bombard you with propaganda. Transparency, honesty and providing information - these are
the key words. Why did we set this as our goal? The environment and framework in which the
financial sector operates has changed significantly over the past few years. Swiss banks
have had to adapt to these changes, which they have done sometimes willingly, sometimes
reluctantly, in order to remain successful. I would say that on the whole we have largely
succeeded, but this is only one side of the coin. We are still battling against an
outdated image that receives constant reinforcement from movies and spy stories
-- an image completely out of touch with the new reality. This situation is
often aggravated for reasons of competition. The Swiss public and financial institutions
would be well advised to take a close look at the criticism being levelled as well as at
who is levelling it. Over the next few years, one of our most important communications
goals will be to change this perception. We aim to achieve this through open and
self-assured communication. A major step towards this came with the Executive Committee
"International Financial Centre Switzerland", or "LAIF" for short.
This Committee's communications strategy can be summed up in two sentences:
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Communication needs to be proactive. |
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Communication means providing information to target groups both continually and in a self-assured manner. |
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Proactive communication means seeking to establish a dialogue and tailoring the right
information to the right target group. Over the past few months, members of the LAIF have
visited - amongst others - representatives of the US government, the Federal Reserve
Board, Capitol Hill, the EU Commission and the OECD. For the last two years we have been
holding our "Swiss Plus - Financial Excellence" roadshows in different
international financial centres. Upcoming events will include cities such as New York,
London, Berlin, Frankfurt, Paris, Madrid and Milan.
Painstaking explanations of the statutory and regulatory frameworks are not enough.
Strengths and success factors have to be stressed time and again. Among Switzerland's
strengths are its political stability, stable currency, highly skilled workforce, proven
innovation skills and, last but not least, the high level of advisory skills and service
quality in private banking that are so appreciated by demanding clients the world over.
In short, Switzerland's financial centre has always had a lot to say. Now we want to be
heard and understood as well.
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Junior
Bank
