At Zuercher Kantonalbank, new CEO Urs Baumann says business with high-net-worth individuals is one of his targets for growth, part of which involves expansion into Germany. The bank received a facilitated exemption recently upon the completion of a multi-year project and is seen as the entry ticket for pursuing clients there.

With such an exemption, a Swiss bank can actively solicit funds in Germany without having a local branch, but the bank is subject to equivalent supervision in its home country, according to German financial regulator Bafin.

EU Harmonization Plans

Meanwhile, reform is underway in the EU to manage cross-border assets. If advocates of strict capital market reform get their way, it will put a stop to the easier measures. By building up its business in Germany, ZKB considers this a low-risk bet.

For many institutions such as private banks and independent asset managers, a second branch is not worthwhile for purely economic reasons and is hardly in line with their business models.

Unimportant for Big Banks

For large banks, the exemption is not important since many already have EU subsidiaries. UBS located its «Europa Bank» in Frankfurt in the city's Opernturm, where it employs around 850 people in wealth management, investment banking, and asset management.

Austrian Presence

ZKB doesn't have the same scale as UBS, but it expects a great deal from the license to acquire customers in Germany where it sees great potential in the market, above all to broaden its sources of income. The foray into Germany is not the first step outside Swiss borders. In Austria, the state institution has been active in the market since 2010 through a wholly-owned subsidiary.

Internal Division of Labor

The local Zuercher Kantonalbank Oesterreich has its banking license including EU passporting rights. But the license is valid only for the Austrian bank and cannot be used from Zurich, as ZKB confirmed upon request by finews.com.

ZKB Oesterreich will continue in southern Germany, operating out of Austria. By contrast, its Swiss parent will operate in all German federal states, but this will be in addition to the Austrian subsidiary in Germany.