In a recent speech, President of Geneva’s Private Bankers, Yves Mirabaud, outlined details of the regulatory consequences of the financial crisis for Switzerland.
By way of introduction, Mirabaud explained that the financial crisis resulted in a series of reactions at political, legislative and regulatory level, both at home and abroad. Fully supported by the Swiss private bankers, the determination arose to avoid a repeat of such a crisis in future.
In order to achieve this goal, Mirabaud underlined the importance of carefully examining the root causes of the crisis, of taking targeted and efficient measures, and of carefully examining the impact of the initiatives on the competitiveness of the Swiss financial centre.
Alluding to the various causes responsible for the crisis, Mirabaud stressed that most did not have their origins in Switzerland. Yet Mirabaud maintained that some solutions for combating the complex causes of the crisis are focussing on factors which were not at the root of it, including banking secrecy.
As a result, pressure was exerted on countries to amend their traditional systems of banking secrecy, driven more by the need of debt-laden states to recover key tax revenues than by the need to prevent a new crisis, Mirabaud noted.
Acknowledging the need to improve certain areas of regulation and supervision in the wake of the crisis, and aware that the Swiss authorities came under immense political pressure to be seen to act, both at home and abroad, Mirabaud explained that the reaction of Switzerland’s Financial Market Supervisory Authority (FINMA) was a knee-jerk one.
Feeling compelled to draft extensive documentation (circulars, reports, position papers and investigations), FINMA has, Mirabaud maintained, presented texts to financial institutions on almost a daily basis. According to Mirabaud, these institutes have been finding it difficult to navigate the “jungle” of documentation and information, with compliance departments overstretched, and at pains to comprehend precisely what is expected from them. Added to this regulatory uncertainty is tense competition, Mirabaud pointed out.
Noting that banks in Switzerland have needed to mobilize significant resources in order to understand and analyse the various documents, Mirabaud stated that most banks, including the private bankers, feel at odds with a situation whereby big banks on the one hand benefit from an implicit state guarantee as a result of their size, while independent wealth managers on the other are still not subject to supervision – in stark contrast to regulations applied in the EU, in the US and indeed in practically all financial centres of significance.
Some of the provisions of the supervisory authority have been adopted without prior consultation and without thorough clarification, Mirabaud continued, even though their practical implication is of great bearing. The debate, he argued, should not be about the quantity but rather about the quality of the regulation, and about ensuring that it is both pragmatic and relative and that it considers the competitive international environment.
Here, Mirabaud alluded to guidelines for financial market regulation drawn up in 2005 by the Swiss Federal Finance Administration in collaboration with the Swiss Banking Commission and the Federal Office for Private Insurance. These guidelines encompass ten rules pertaining to regulatory activities. In accordance with these guidelines, he added, the following basic principles should be applied when drafting each new regulation:
According to Mirabaud, the private bankers steadfastly believe that these guidelines are still completely relevant today. Insisting that safeguarding the competitiveness of the Swiss financial centre is also the responsibility of the Confederation’s authorities, Mirabaud underlined the need for the authorities to take these guidelines into account when drawing up new regulations. The competitiveness of the Swiss financial centre must be taken into consideration when drawing up all new regulations, given that it is imperative for both the economy and for jobs, he maintained. It is also crucial not to proceed unilaterally with regulatory measures, Mirabaud stressed.
Equally, the authorities must also intervene at international level if absurd, disproportionate or even politically motivated regulations are adopted abroad, which have repercussions for Switzerland.
In conclusion, Mirabaud revealed that the Swiss private bankers are now urging the authorities despite the turbulences, or even because of the turbulences and the dangers that they bring for the competitiveness of the financial centre, to reflect upon these basic principles, designed to shape the Confederation’s regulations in a reasonable and predictable way, tailored to the size and type of the different business models active in the Swiss financial centre, while at the same time taking into consideration the competitiveness of the country. An expression of national values, these basic principles, even after the crisis of the past few years, have maintained completely both their validity and their force, he ended.
By way of introduction, Mirabaud explained that the financial crisis resulted in a series of reactions at political, legislative and regulatory level, both at home and abroad. Fully supported by the Swiss private bankers, the determination arose to avoid a repeat of such a crisis in future.
In order to achieve this goal, Mirabaud underlined the importance of carefully examining the root causes of the crisis, of taking targeted and efficient measures, and of carefully examining the impact of the initiatives on the competitiveness of the Swiss financial centre.
Alluding to the various causes responsible for the crisis, Mirabaud stressed that most did not have their origins in Switzerland. Yet Mirabaud maintained that some solutions for combating the complex causes of the crisis are focussing on factors which were not at the root of it, including banking secrecy.
As a result, pressure was exerted on countries to amend their traditional systems of banking secrecy, driven more by the need of debt-laden states to recover key tax revenues than by the need to prevent a new crisis, Mirabaud noted.
Acknowledging the need to improve certain areas of regulation and supervision in the wake of the crisis, and aware that the Swiss authorities came under immense political pressure to be seen to act, both at home and abroad, Mirabaud explained that the reaction of Switzerland’s Financial Market Supervisory Authority (FINMA) was a knee-jerk one.
Feeling compelled to draft extensive documentation (circulars, reports, position papers and investigations), FINMA has, Mirabaud maintained, presented texts to financial institutions on almost a daily basis. According to Mirabaud, these institutes have been finding it difficult to navigate the “jungle” of documentation and information, with compliance departments overstretched, and at pains to comprehend precisely what is expected from them. Added to this regulatory uncertainty is tense competition, Mirabaud pointed out.
Noting that banks in Switzerland have needed to mobilize significant resources in order to understand and analyse the various documents, Mirabaud stated that most banks, including the private bankers, feel at odds with a situation whereby big banks on the one hand benefit from an implicit state guarantee as a result of their size, while independent wealth managers on the other are still not subject to supervision – in stark contrast to regulations applied in the EU, in the US and indeed in practically all financial centres of significance.
Some of the provisions of the supervisory authority have been adopted without prior consultation and without thorough clarification, Mirabaud continued, even though their practical implication is of great bearing. The debate, he argued, should not be about the quantity but rather about the quality of the regulation, and about ensuring that it is both pragmatic and relative and that it considers the competitive international environment.
Here, Mirabaud alluded to guidelines for financial market regulation drawn up in 2005 by the Swiss Federal Finance Administration in collaboration with the Swiss Banking Commission and the Federal Office for Private Insurance. These guidelines encompass ten rules pertaining to regulatory activities. In accordance with these guidelines, he added, the following basic principles should be applied when drafting each new regulation:
- Protecting the attractiveness of the financial centre as a location;
- Considering costs and benefits;
- Developing a regulation that is differentiated;
- Analysing the regulatory impact on the national economy;
- Examining the regulatory need for the new regulation; and
- Where necessary, adopting a transparent and comprehensible regulation, with the involvement of stakeholders.
According to Mirabaud, the private bankers steadfastly believe that these guidelines are still completely relevant today. Insisting that safeguarding the competitiveness of the Swiss financial centre is also the responsibility of the Confederation’s authorities, Mirabaud underlined the need for the authorities to take these guidelines into account when drawing up new regulations. The competitiveness of the Swiss financial centre must be taken into consideration when drawing up all new regulations, given that it is imperative for both the economy and for jobs, he maintained. It is also crucial not to proceed unilaterally with regulatory measures, Mirabaud stressed.
Equally, the authorities must also intervene at international level if absurd, disproportionate or even politically motivated regulations are adopted abroad, which have repercussions for Switzerland.
In conclusion, Mirabaud revealed that the Swiss private bankers are now urging the authorities despite the turbulences, or even because of the turbulences and the dangers that they bring for the competitiveness of the financial centre, to reflect upon these basic principles, designed to shape the Confederation’s regulations in a reasonable and predictable way, tailored to the size and type of the different business models active in the Swiss financial centre, while at the same time taking into consideration the competitiveness of the country. An expression of national values, these basic principles, even after the crisis of the past few years, have maintained completely both their validity and their force, he ended.
