SwissBanking
The online magazine of the Swiss Bankers Association
2017/09/21 09:45:00 GMT+2

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Market access to preserve competitiveness

Market access to preserve competitiveness

Swiss banks make a significant contribution to value creation in Switzerland. In order for this to remain the case, access to foreign markets must be improved in a sustainable manner.

Accounting for around 10 percent of value creation and a large number of highly qualified jobs, the banks in Switzerland are an important pillar of the domestic economy. If this is to remain the case, it is necessary to have framework conditions that allow the banks to continue to provide their services out of Switzerland in future. Access to foreign markets is thus of strategic importance for Swiss financial services providers.

Rules unclear

Due to Switzerland’s location at the heart of Europe, the EU/EEA is a strategic focal point for the Swiss banking industry’s export business. Maintaining and expanding the possibilities for market access is key for all areas of business pursued by the banks in Switzerland.

Directives like the MiFID II are not directly applicable.

As a result of the financial crisis, so-called third country provisions that massively restrict cross-border business were added to the EU’s body of rules. For prudential reasons, the EU took what are de facto protectionist measures: in order to protect its financial system against negative external influences, the EU introduced rules that wall it off from the outside. Such directives, for example the Markets in Financial Instruments Directive II (MiFID II), are not directly applicable, but are instead transposed into the national law of the member countries, meaning that each country develops its own rules.

Swiss banks are only permitted to provide services passively.

Switzerland is not a member of the EU, and so the banks in Switzerland currently have no legal entitlement to the active provision of banking services out of Switzerland to customers within the EU. From the EU’s perspective, the Swiss banks are only permitted to provide services passively, but not even this is clearly defined and differs from one country to the next.

Three strategies for market access

In order to ensure access to foreign markets or to expand such access, the Swiss Bankers Association (SBA) continues to support the simultaneous pursuit of three different strategies. These are independent of one another in terms of timing, political sentiment and approach:

  • Bilateral negotiations with individual EU member states are key for the short-term. As part of the bilateral negotiations, opportunities should be found that allow the banks to serve their customers out of Switzerland, despite hurdles such as the introduction of the obligation to have a local branch. These discussions often prove to be difficult, but should not be abandoned.

Bilateral negotiations with individual EU member states are key.

  • In the medium-term, market access to the European single market (EU equivalence) must be secured. EU equivalence means establishing parity, so not the same rules and requirements, but rather regulations that have the same effect. The EU is always to recognise equivalence, however, when it comes to recognition of the equivalence of third countries, the European Commission reaches unilateral, often politically motivated decisions. Furthermore, the existing processes have many shortcomings, for example, there is no entitlement to equivalence, which is why it does not offer the desired level of legal certainty. It is therefore urgently necessary that the EU establish a defined procedure including a uniform standard with specified timeframes, according to which third countries can achieve EU equivalence. This will require a significant amount of time, which is why it is very important for the banks in Switzerland that the European Commission recognise the equivalence of Swiss legislation for EMIR, MiFID II/MiFIR and AIFMD before the end of the year. Industry is in agreement that full recognition of the equivalence of financial market regulation should be laid down as a condition for a further tranche of cohesion policy funding.

EU equivalence means establishing parity.

  • Lasting access to the European market will, however, only be possible with the conclusion of a financial services agreement (FSA). Even if this step involves a far-reaching adoption of the EU acquis and at present, the necessary political framework conditions are not yet in place, the possibility of an FSA with the EU should continue to be upheld and as soon as an appropriate opportunity arises, be underpinned through exploratory talks.

Walling off markets doesn't promote competitiveness.

Only time will tell which strategy ultimately leads to the desired result. However, one thing is for certain: walling off markets promotes neither the competitiveness of the banks in Switzerland nor of our partners in the EU.