On the 25th of August, finews.com published an article titled «Swiss Banking on a Wild Goose Chase with the EU» which dealt with the relationship of Swiss banks with its neighbors and the EU.

According to the editor, the lack of market access is due to outmoded client protections in Switzerland. This view is not valid and the Association of Swiss Private Banks (ASPB) would attach importance in correcting that.

1. The editor manages a sleight of hand by never mentioning the Swiss Financial Services Act. The 2018 act, which came into effect in 2020, is aimed at strengthening the protection of clients. It foresees an assessment of appropriateness and suitability, documentation and account rendering based on the European MiFID directive. The idea was to approximate European client protections in Switzerland, simplifying matters for financial service providers with Swiss and European clients.
2. In the introduction, it is claimed that neither protectionism nor political consideration are the reason for a lack of market access. But in Europe, there are ostensibly protectionist reasons as to why both Swiss and British-based banks are having increasing difficulties. When France, Italy, and other countries demand a branch presence in their country from a third-party state, it is only in defense of their own banks. It is not about a lack of client protections or «material compliance gaps».
3. It is also claimed in the article that Swiss banks do not adhere to local MiFID rules for European clients. It is, however, forgotten, that European clients can legally charge Swiss banks according to their own laws if they are not upheld. This risk is too large for the domestic financial service providers and explains why MiFID rules are strictly maintained in practice.
4. When it comes to deposit protection, the writer ostensibly does not know what he is talking about. The question is easily answered. All banks with an office in Switzerland are required to be members of esisuisse deposit insurance association. Should a bank go bankrupt, esisuisse ensures quick payment of the insured deposits, which does not include securities.
5. The criticism of family ownership needs to be opposed. These banks adhere to FINMA rules as strictly as other banks do. The statement by a single expert has no basis and it is insulting. Family ownership leads to such banks acting prudently and for the long term given that it is about their own assets. Further, the use of «private bankers» at the start and end of the article probably refers to small private banks. The name «private banker» is a recognized trademark and has an exact definition, which requires one or several partners who bear full liability. There are five such remaining institutions in Switzerland.

It is a fact that banks in Switzerland suffer from a lack of market access, particularly in the EU. It is one of the largest challenges for the Swiss financial center. It has nothing to do with gaps in Swiss regulation or supervision. The reason lies far more in the protectionist behavior of the EU. This issue indicates that there is only a political solution, one that strives for a more regulated relationship with the EU, which the financial center and the economy would only profit from.

Editor’s Response

The editor (Andrew Isbester) respectfully acknowledges the letter but fully stands by the content of the original article and would like to make the following points.

1. The act was not mentioned as it is a high-level, general text. As indicated in the article, it has no direct references to fair conduct, responsible product offerings, and vulnerable clients. Finma was directly queried when drafting the article and their subsequent response received indicates that there are no direct references to any of the above terms in their guidance, directives, and circulars. Additionally, the law in Switzerland came into effect in 2020, well over a decade after it did in many other jurisdictions. I would note that in Hong Kong the first circular on suitability was issued in 2009, in Singapore and the US in 2011, in the UK a suitability framework was in place by 2016, and, most importantly, in the EU by 2012. Above and beyond that, the Monetary Authority of Singapore (MAS) had been conducting thematic inspections of suitability at private banks in 2018 and 2019. In Hong Kong, these took place in the middle of the last decade, well in advance of Swiss legislation. The fact that such a similar review has not yet occurred in Switzerland is evidence that the jurisdiction is a generation behind, as claimed in the article.
2. The editor would again refute this rationale. The EU is not being protectionist per se. Its approach appears far more explicit. As the article indicated, the EU plans to introduce new legislation that takes direct aim at the private banking business by rating it as a higher risk factor. Based on the past working experience of the journalist in compliance, risk, and financial crime, this would potentially make it exceedingly difficult for institutions to be active without a presence or a license. Given that, it would be more reasonable to apply for one and maintain such a presence. The situation with the UK is entirely different and is mainly related to that country’s departure from the EU.
3. As indicated in the article, Swiss banks adhere to higher standards abroad than they do in Switzerland itself. The fact as to whether they do so domestically remains untested at this juncture given the law only came into effect in 2020.
4. The association has misinterpreted this point. The article deals with small private banks that want to gain access to neighboring countries without a presence. There is little incentive for such jurisdictions to run the risk or uncertainty of relying on such a process with edusuisse. It has also not ostensibly been tested in practice to this journalist’s knowledge and in discussions with various compliance experts.
5. The journalist understands the criticism of family ownership but maintains that the prudence and long-term approach is likely in the best interests of the institution and not necessarily the client, which suitability, among other client protections, attempts to mitigate. The statement by a single expert was a curated view and the source had the opportunity to review it.

The editor fully understands the association’s conclusion about the challenges the country faces and the current situation with EU.