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The future of regulation

The future of regulation

Switzerland’s international competitiveness as a business location is decreasing. One reason for this is the constant increase in regulatory density, which is placing a growing administrative as well as financial burden on companies.

The government has now also recognised this problem. On 15 June 2016, Parliament mandated the Federal Council to prepare a legislative proposal that will lead to systematic, effective needs analyses and regulatory impact analyses (RIA), and that foresees the review of RIAs by an independent body. Also, in its report on financial market policy published on 20 October 2016, the Federal Council defines the optimisation of regulation as one of the five key areas of focus of its future financial market policy.

With the “Strategy for good regulatory policy”, the Bankers Association presents a well-elaborated potential solution to the problem. The strategy centres around a review process conducted by an independent inspection authority, a system which has proven successful in a number of different countries.  

Competition between locations: good regulation is key

As a location, Switzerland faces stiff international competition. This applies in particular for the financial sector. The framework conditions established by regulation determine the business climate enjoyed by providers and customers: affordable, expedient and commensurate rules attract providers and customers, and lead to the creation of added value and jobs in Switzerland. Pointless, cumbersome and expensive regulation, on the other hand, reduces Switzerland’s competitiveness and is detrimental to customers.  

Cost of regulation is holding Switzerland back

Until now, Switzerland’s reputation for business-friendly regulation was justified. In the past few years, however, a troubling trend has been emerging: regulatory density is constantly increasing.

  • The number of regulations continues to rise.
  • Regulations are becoming more and more detailed.
  • And regulations are being changed with growing frequency.

According to Avenir Suisse, the costs of regulation in Switzerland correspond to up to 10% of gross domestic product, depending on the estimate.

There is evidence that Switzerland’s international competitiveness is already suffering the consequences thereof. In the World Bank’s Ease of Doing Business Index, Switzerland fell from 11th place (2005) to 31st place (2017).

Remedies applied to date are not effective

Awareness of this problem has existed for some time, and remedies do exist: needs analyses, regulatory impact analyses (RIA), and ex-post evaluations. To date, however, their effect has been only very limited. The reasons for this are:

Switzerland must act now

If Switzerland wants to avoid inevitably falling behind in terms of its competitiveness as a location, it must address the problem of rising regulatory costs. This by no means translates into deregulation. Regulation is necessary and the financial crisis is a good example of this fact. It is more important and expedient to introduce an intelligent regulatory process that ensures regulation in Switzerland becomes good for the long-term.

The government has also recognised the need for action. Various parliamentarians have submitted motions that address this matter (see box “Political motions”).

With the “Strategy for good regulatory policy” we are contributing a fully elaborated solution to this discussion. The strategy provides possible solutions that are effective across all regulatory levels.

Strategy for good regulatory policy

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The strategy (final report, policy paper, presentation) does not reinvent the wheel. It builds on the federal government’s existing legislative process and integrates instruments that already exist. One new aspect contained in the strategy is ongoing review. This is not only a standard and proven practice in business, it is also in line with tried-and-tested models for regulatory review applied abroad. Also new is the systematic involvement of the concerned parties. 

Good regulation for the purposes of this strategy is:

  • expedient
  • effective in the manner intended
  • commensurate
  • cost-efficient

The strategy for a good regulatory policy consists of four key elements