Tax agreements key to the future - confidence despite a difficult environment

Basel, September 04, 2012 Although the current situation for banks is characterised by falling margins, a large number of regulatory projects and constant pressure from abroad, Switzerland can continue to be a leading financial centre. This requires banks, politicians and the regulatory authorities to work together to achieve this goal. The banks are also aiming to tap into new business areas.
At the media conference which takes place before Bankers Day every year, Patrick Odier, Chairman of the Swiss Bankers Association (SBA), highlighted the numerous challenges that the banks in Switzerland currently have to face, particularly in the international environment. Odier stressed in particular that the SBA and every bank in Switzerland has expressly committed itself to the tax agreements with Germany, Great Britain and Austria. The agreements offer all parties involved more advantages than disadvantages and are therefore fair and balanced. Odier clearly rejected holding renegotiations with Germany. The agreements, according to Odier, are a historic opportunity and essential for the strategy of taxed assets. Additionally, a solution has to be found as regards the tax dispute with the US, emphasised Patrick Odier. Over the last few months, Switzerland has accommodated the US considerably in terms of administrative assistance. The US now needs to show that it is interested in finding a mutually satisfactory solution to the negotiations. Patrick Odier regretted that employee data had to be supplied to the US: “In such a difficult situation, the affected banks are unconditionally responsible for providing their employees with all the support they need.” Odier regarded the negotiations between Switzerland and the US regarding the easier implementation of FATCA as positive. Switzerland has therefore succeeded in creating a model which better fits the national legal system.

"Constructive dialogue and sustainable solutions"

These international challenges are often used in order to call for increased regulation and condemn banks across the board – also to reinforce political positions. This places the successful operations of the banks at risk, although banks are an important driver of growth for Switzerland. Patrick Odier appealed for the financial centre, politics and the authorities to close ranks and added: “We want to establish a constructive dialogue allowing us to find sustainable solutions.“ Furthermore, the Chairman of the SBA commented on three areas that are of strategic importance for the Swiss banking industry. First of all, Switzerland is aiming to become a key player in the global market for asset management; secondly, there is ongoing work under way to become one of the trading platforms for the Chinese currency, the renminbi; and thirdly, training and development will be a key factor for future development.

Good level of earnings in a challenging Environment

The latest figures from the financial centre were presented by Claude-Alain Margelisch, CEO of the SBA. Aggregated earnings suffered a 3.8% drop to CHF 59.1 billion, however cost-cutting measures ensured that a profit of CHF 13 billion was achieved - almost on a par with the previous year despite the extremely challenging international environment. Assets under Management dropped in 2011 to CHF 5,269 billion (2010: CHF 5,473 billion), with one of the reasons being the lower valuation of securities portfolios. The proportion of foreign assets remains unchanged at just over 50% of the total managed assets. In other words, there were no major shifts of foreign client money to other countries.

Employment trend

2011 has turned out to be the second year in succession in which there has been a slight increase in the number of people recruited. The banks estimate, however, that there will be a slightly lower number of people in employment in the second half of 2012. Domestic headcount was up 0.1% to 108,100. A recently published study indicated that for every 100 jobs in banks, the demand for input creates 115 jobs in other industries. Claude-Alain Margelisch commented on what would occur if banks have to cut jobs: “Without a strong banking industry, jobs will be lost in other sectors. This situation can be prevented if Switzerland creates optimal conditions for its banks.” The study predicts that the financial sector will grow in parallel with the overall economy until 2020, at which point the sector is expected to make up 11.5% of the country's overall economy. Claude-Alain Margelisch commented: “Although we currently find ourselves in a period of transition, the financial centre will continue to remain as strong as it is today in the future. It remains extremely important for Switzerland.”