Zurich, 4 July 2007 - Over 50 senior representatives of the British and Swiss financial services industries met in Zurich today for the second Swiss – City of London Financial Round Table hosted this year by the Swiss Bankers Association and actively supported by the Swiss embassy in London.

This year’s Financial Round Table was devoted to discussing the merits of principles-based regulation as opposed to rules-based regulation for the financial services industries. The Swiss side was headed by Pierre Mirabaud, Chairman of the Swiss Bankers Association, and included Philipp Hildebrand, Vice-Chairman of the Swiss National Bank; Daniel Zuberbühler, Director of the Swiss Federal Banking Commission; Peter Gomez, Chairman of the SWX Group, as well as senior representatives of Swiss banks.

The City of London’s delegation included Angela Knight, CEO of the British Bankers Association, Stuart Fraser of the City of London Corporation’s Policy and Resources Committee; Thomas Huertas, Director of the Wholesale Firms Division of the Financial Services Authority; Stephen Sanders, Head of Group Regulatory Risk at the Royal Bank of Scotand; and Anthony Belchambers, CEO of the Futures and Options Association.

Pierre Mirabaud said: “The discussions and exchange of professional experiences between both sides clearly confirmed the advantages of a principles-based approach to financial markets regulation and high-lighted the disadvantages of the bureaucratic, box-ticking mentality generated by the inflexibility of a strictly rules-based approach.”

Speaking for the British delegation, Angela Knight said: “The many differences between regulators across Europe are better addressed through meetings such as these than through changes to the law or to rules. And for the industry, to operate in a competitive market place under regulatory principles rather than detailed rules will bring better results for customers and the industry alike.”


Appendix:

1. Objectives of the Swiss - City of London Financial Round Tables

The objectives of the Swiss - City of London Financial Round Tables are:

• to help bring about better regulation and supervision in both jurisdictions;
• to contribute to better regulation in third countries by actively shaping the ongoing evaluation of international financial standards and best practices;
• to promote national and international dialogue between and among the financial services industry, policy-makers, regulators and supervisors;
• to promote principles-based as opposed to rules-based regulation;
• to promote international convergence of regulatory approaches based on mutual recognition of equivalent (as opposed to identical or harmonised) regulation.
  

2. Joint Declaration 2007

Following the 2007 Swiss - City of London Financial Round Table, the British Bankers Association (BBA) and the Swiss Bankers Association (SBA) issued the following Joint Declaration:

The British Bankers Association (BBA) and the Swiss Bankers Association (SBA), recognise the following advantages of a principles-based approach to financial markets regulation:

• It is easier to generate a set of principles rather than a set of detailed rules;
• Understanding a set of principles is easier for both staff and customers;
• Due to its greater flexibility, it is particularly suitable for a heterogeneous banking sector (e.g. where firms differ markedly in size, business areas, risk profiles, systemic relevance, etc.);
• The financial services industry has more flexibility to develop its own compliance ethos within the context of its own markets, legislative backgrounds and cultures;
• A principles-based approach encourages a cooperative and compliance-oriented relationship between a firm and its regulator and facilitates mutual recognition of financial regulation among regulators;
• A principles-based approach encourages the industry to take a risk-based approach to properly conducting its business in that a firm can decide what resources it will allocate to cover higher-risk business activities. This approach is not only more cost effective but also supports key regulatory objectives such as the control of systemic risks;
• Firms are in a better position to respond to market signals and to balance risks (market risks, operational risks, legal risks, reputational risks, etc.) with business opportunities. Such firms will tend to be more competitive, innovative and thus stronger: This will go a long way towards meeting all main regulatory objectives of systemic risk control, protecting customers, and enhancing competition and a level playing field;
• Well-managed firms will derive a regulatory dividend from a principles-based approach in the form of, for example, relatively lower levels of regulatory capital, less frequent risk assessments, greater reliance on firms’ senior management or less intensive risk mitigation programmes.

Recognising the above advantages, the British Bankers Association (BBA) and the Swiss Bankers Association (SBA) have agreed:

• to continue to cooperate and promote principles-based regulation;
• to encourage the respective regulators to cooperate even more closely and to work with them to understand any bilateral regulatory issues for banks doing business between the UK and Switzerland;
• to work together more closely on international regulatory issues of particular interest to Swiss and UK banks.

Note to journalists:
The first Swiss – City of London Financial Round Table was held in London on 30 June 2006 and hosted by the Lord Mayor of the City of London at Mansion House.


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