Geopolitics has seen a resurgence, particularly since the Russian invasion of Ukraine in February 2022. Few major companies fail to mention geopolitical developments as significant risks to their future business. A recent survey showed that even two-fifths of small and medium-sized enterprises are concerned about «foreign policy developments». The revival of geopolitics and the associated resurgence of tariffs have reportedly dampened even the Chinese appetite for foreign spirits.

On Thursday, the Swiss Banking Association (SBVg) in collaboration with consulting firm zeb, released a study focusing on geopolitics—specifically, the impact of international conflicts on the Swiss banking sector. One somewhat unsurprising finding from the publication «The Swiss Financial Center in the Context of Geopolitical Risks» is that banks with international clients are more affected by these tensions than those with a national focus.

«Complex Interdependencies» and Safe Haven

The five key insights and associated demands from the SBVg are somewhat specific but still relatively general.

At first geopolitical risks create «complex interdependencies», increasing risks for Swiss banks. In such times, the status as a safe haven is especially valuable for the stability of the financial sector.

Redefining Strategy on International Sanctions

Second, the study identifies Switzerland's stance on international sanctions as the most significant geopolitical risk factor. The conclusion is that in a multipolar world order, Switzerland needs to redefine its role and strategy regarding sanctions and clarify its neutrality. Conversely, banks also play a crucial role in influencing and shaping sanctions policies. For banks, proactive risk management is essential.

Third, according to SBVg, international corporate banking and asset management are most affected by geopolitical tensions and could face losses due to the volatile global market conditions. In contrast, national wealth management and retail banking benefit from Switzerland's reputation as a safe haven.

Significant Investment Needed in Technology

Fourth, the study identifies the financial sector's ability to rapidly and effectively adapt to new challenges as a critical success factor that has been significant in the past and remains highly relevant today.

Fifth, digitalization, particularly in the field of artificial intelligence (AI), is crucial for competitiveness. Swiss banks need to make substantial investments to maintain their position in an increasingly global and technology-driven market. The SBVg notes that the study includes cyber threats under geopolitical risks, emphasizing the importance of the technological aspect as well.

Geopolitics on the Banking Day Agenda

The study is based on the analysis of over 130 publications (including the use of AI) and 22 interviews with bankers and academics. The results were then evaluated by experts, focusing on the interactions between macro risks and their impact on business models. Finally, the effects on six business models over three time periods were simulated, and these results were validated with banking experts.

Geopolitics will also be a major topic at the SBVg’s Banking Day 2024. Ambassador Christoph Heusgen, head of the Munich Security Conference, is scheduled to speak at the event. The Banking Day takes place this afternoon in Geneva, fittingly at the Maison de la Paix.