Swiss banking centre - a great past and a successful future?
Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank
Swiss International Finance Forum, Berne, 20.05.2014
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History has shown that important international banking centres can develop in small countries as well as large ones. Switzerland is an excellent case in point. Over time, the banking industry in this country has become more than usually important in relation to the economy as a whole. The first reason for this is that the banks provide the highly developed Swiss economy with financial services. The second is that Swiss banks create value by exporting their services. In this respect, their most important source of income is cross-border wealth management. In addition, the two Swiss big banks play an important role in global investment banking business.
However, for some years now, the prominent international role of the Swiss banking centre has been subject to increasing criticism. The actions of the banks before and during the financial crisis and the need for state intervention have, to some extent, reduced the popularity of the banks with the Swiss public and its politicians. As a result, the question was increasingly raised as to whether an important and international banking industry is a benefit or, rather, a risk factor for Switzerland. The situation is aggravated by the fact that the Swiss banks' cross-border wealth management business has suffered considerable reputational damage following the disclosure of cases of assisted tax evasion.
From an economic point of view, Switzerland still has a major interest in a strong banking centre of international importance. To ensure that Switzerland, as a comparatively small country, is able to provide a home to a banking centre of this kind in future, despite the enormous challenges, banks need to fulfil three prerequisites. The services offered by the banks, their crisis resilience and their reputations must all be considerably above average.
Apart from the banks themselves, politicians and the authorities also face challenges. Their efforts need to focus on creating appropriate business conditions. Four factors are particularly important in this respect. First, the 'too big to fail' issue must be alleviated by means of relevant and effective regulations. Second, Switzerland's good reputation as a politically and economically stable country must be maintained. Third, a plan must be drawn up whereby privacy is guaranteed to honest tax-paying bank customers from abroad, even when the OECD standard on the automatic exchange of information is applied. Fourth, in discussions with authorities and regulators abroad, efforts should be made to ensure that access to foreign markets is guaranteed for Swiss banks.