Bank and financial market regulation in Switzerland: a permanent construction site
Niklaus Blattner, Member of the Governing Board
General Meeting of the Swiss Association of Independent Securities Dealers, Berne, 29 May 2002, 29.05.2002
Clear supervisory rules are crucial for ensuring the integrity of Switzerland as an international financial centre; they serve to protect depositors, investors and insurance holders, and they prevent funds of criminal origin from entering the system. Moreover, such rules are essential for ensuring the smooth functioning, efficiency and stability of the financial system also in the long run, and for maintaining and strengthening international competitiveness. Regulators must therefore always act in accordance with these goals and, despite the related difficulties, systematically analyse all potential measures with regard to costs and benefits.
Regulations with a purely national focus are not suited to protect globalised financial markets from crises. The past few years have seen financial market supervision becoming even more internationalised. Minimum standards are intended to limit the notorious «race to the bottom» caused by regulatory arbitrage, i.e. the race towards less regulated and supervised markets. The most influential standard-setting bodies are groupings of state supervisory authorities. Switzerland participates in drawing up such regulatory standards and implements them in an exemplary manner.
A country's financial market supervision is not only shaped by international standards, but also by national developments and insights. As markets are dynamic, it is imperative to review supervisory regulations on a continuous basis: bank and financial market regulation have become a permanent construction site in Switzerland as well.
Twice in recent years, Switzerland's existing financial market supervision has been comprehensively appraised and been given good marks. For one thing, the Zufferey commission of experts identified the strengths and vulnerabilities of financial market regulation and supervision in Switzerland. For another, Switzerland participated in the Financial Sector Assessment Program (FSAP) of the IMF and the World Bank. Both assessments came up with similar findings, according to which regulation and supervision in Switzerland meet high requirements and essential reforms are already well under way.
The creation of a statutory basis for group supervision of financial conglomerates is especially pressing at the moment. This issue is being dealt with in the ongoing revision of the Insurance Supervision Act. Another topical subject is the reform of bank reorganisation, bank liquidation and depositor protection as well as the revision of bank audit rules. In future, the Swiss Federal Banking Commission intends to systematically monitor the statutory audit firms operating on its behalf. Also, all financial institutions will be regularly subjected to an audit conducted by a second audit firm. Finally, the total revision of the National Bank Law is designed to take account of the growing significance of the supervision of payment and securities settlement systems in order to adequately ensure the stability of the financial system.
The Swiss National Bank contributes to the robustness and efficiency of Switzerland as an international financial centre without diminishing the responsibility of the other participants.