Swiss-British Round Table calls for open, consistently regulated international markets

Basel, April 19, 2013 The need for consistent, proportionate regulation and open markets, and the dangers of over-regulation and protectionism, were the central issues at this year’s City of London – Swiss Financial Round Table. The Round Table is an important event for strengthening the collaboration between the successful international financial centres in Switzerland and the United Kingdom.
Given the challenging economic environment, investors and businesses need reliable access to liquid markets, products and services. In the wake of the financial crisis, financial centres all over the world have seen an extensive programme of regulatory reform, driven by the pressure on policymakers and regulators to avoid further crises, remove moral hazard and ultimately protect taxpayers. Despite the G-20’s commitment to an internationally harmonized approach, there have also been unilateral national or regional moves towards more restrictive regulation and supervision, and a tendency towards national or regional fragmentation of international markets. Cross-border business and clients with multi-national backgrounds are an important and inescapable reality of today’s globally interconnected world, but insufficient consideration seems to be given by policy makers to the needs of these key economic actors and users of financial markets.

The need to keep financial activity within a consistently and proportionately regulated Environment

The 8th City of London – Swiss Financial Round Table which took place on 19 April 2013 in Basel discussed the challenges for consistent regulation and open markets. Senior financial centre professionals – bankers, regulators and government representatives – from Switzerland and the United Kingdom agreed that appropriate protection of vulnerable investors should not preclude access to global capital markets for sophisticated clients and the price formation process that they require. Uncoordinated new national or regional requirements may increase the risk of raising barriers to the provision of cross-border financial services. The participants warned that as a result, the users of financial services may suffer: investors such as pension funds and retail investors may find it harder to seek real and properly diversified returns; sources of funding for corporate and sovereign issuers of securities may be curtailed, costs may rise, and businesses using derivatives to hedge their risks may find that illiquidity in certain instruments means they remain financially exposed. Likewise, wealth management clients may find themselves cut off from services that are most effectively or safely provided cross-border. As a result, clients may shift to unregulated sources of financing and turn to a shadow banking sector which is increasingly seen as a source of potential future risk and instability. Since a properly functioning financial system is essential for financing the real economy, such a move away from regulated sectors could have a negative impact on both growth and financial stability.

Patrick Odier, Chairman of the Swiss Bankers Association, is convinced that the collaboration between international financial centres should aim to counteract market fragmentation and protectionist tendencies: “Economic success in a globalized world requires strong and open financial centres; regulation therefore shall not lead to protectionism. Regulatory as well as non-tariff barriers to trade can lead to critical credit market access difficulties for small and medium enterprises as well as to reduced financial product and services choices for investors. Equivalent rules should be recognized as such.”

Sir Nigel Wicks, Chairman of the British Bankers’ Association said: “Financially sound, competitive, open and responsible markets provide the basis for prosperity, jobs and growth. Regulation should facilitate the access of businesses and investors to stable and liquid markets and provide investors with proper protection. A particular priority for regulators and businesses should be the provision of finance for the small and medium sized enterprises which will provide the future’s jobs and growth. It is important for these issues to remain at the forefront of the attention of all those who have responsibilities in financial markets.”

Note to editors: The “City of London-Swiss Financial Round Tables” are organised jointly by the British Bankers’ Association and the Swiss Bankers Association. The first Round Table was held in London in June 2006. Since then, senior representatives of the British and Swiss financial services sectors have met yearly, alternating between London and Switzerland.