Swiss financial centre looks for continued growth

Banks in Switzerland are assessing both the overall conditions and their sector differently. While the financial industry itself is in good shape, the economic and regulatory trends indicate that there may be some headwinds going Forward.

Patrick Odier, president of the Swiss Bankers Association (SBA), emphasised how important the signing of tax agreements with Germany and the UK was for the Swiss financial centre. Speaking at a media conference, Odier said that the agreements are a break with the past, and that they ensure the privacy of the financial sphere of clients and facilitate bilateral access to the markets of Germany and the United Kingdom. They represent a milestone in the implementation of the 2015 Financial Centre Strategy, one of the goals of which is the acquisition and management of taxed assets.

The SBA also places similar importance on finding a sustainable solution to the open issues regarding the cross-border business with the United States. A solution must be applicable worldwide, definitive and correspond to existing Swiss law. Patrick Odier emphasised that a new treaty with the United States would be difficult to put through politically.

The most important task facing banks in Switzerland is creating the possibility for growth. To accomplish this task, Swiss banks can build on a globally unique combination of strengths: stability, universality, responsibility and excellence. These strengths will be the decisive factors as the Swiss financial centre defends its top position in local and global wealth management and develops business areas such as asset Management.

Claude-Alain Margelisch, CEO of the SBA, presented the current banking barometer, which provides an economic snapshot of the Swiss banking centre. Thanks to a growing economy and low interest rates, Swiss banks generated earnings of CHF 61.5 billion in 2010, an increase of 13.4 per cent. Total assets rose by 1.7 per cent to a total of CHF 2,714.5 billion. The total volume for mortgages and bank loans last year was CHF 898 billion. The majority of lending continued to go to private households. The current upward price trend on the real estate market, with scattered hot spots, is due to low interest rates and rising demand. The banks are working with FINMA to find a solution that would strengthen certain aspects of the existing self-regulation for lending. The SBA was therefore surprised by the announcement made by the Swiss Federal Council to strengthen the capital adequacy requirements for the mortgage business. The SBA remains sceptical about the effectiveness of any quantitative regulations. In particular, even in the area of exceptions-to-policy, the SBA would expect to see risk-based capital adequacy requirements.

The economic outlook is uncertain, as there has been an increase in economic risks. Turning to employment, Swiss banks increased their headcounts modestly in the first half of 2011. However, personnel planning is expected to be more cautious for the second half of the year due to the turbulence in the financial markets, leading to a fairly constant employment Level.

The regulatory environment also looks challenging. The Swiss Bankers Association recognises the need to guarantee and improve the stability of the system through suitable measures. In this regard, the SBA believes that the macroprudential policies of Switzerland should serve to strengthen the resilience of the financial system, limit the impact of a financial crisis on the economy, and ensure a stable provision of bank services to the economy. The SBA expects the appropriate objectives to be clearly defined and limited at the national level. The measures and instruments required are to be determined on this basis. In addition, the SBA expects consultations to be transparent, and it also expects to have the opportunity to participate in an appropriate manner in the drafting of macroprudential regulations.

The complexity of the framework conditions shows the need for banks to become even more client-oriented, quality-conscious and innovative to remain the number one choice globally for the management of wealth.

The Swiss Bankers Day, which takes place tomorrow, is the high point of the year for Swiss banking. The annual general meeting of Swiss bankers in Bern is an excellent occasion for bankers, politicians and industry representatives to gather for an exchange of ideas. Numerous ambassadors will also be present, which lends the event an international air. The welcome message from the Federal Council will be given by Federal Councillor Ueli Maurer.