Swiss Banking: Beijing's Interest Hinges on Swiss Regulator's Decision

Last week's trip to China by representatives of the Swiss financial market yielded results. For the formal decision by Beijing how to engage with Swiss banking the coming months will prove decisive, research by showed.

Swiss star diplomat Jacques de Wattewil, director of the country's State Secretariat for International Financial Matters (SIF), had to cancel his participation at short notice. The delegation still returned with  positive results from their summit with government and banking respresentatives in Beijing.

The Swiss delegation visited the Chinese capital on September 1 and 2, as reported. The team was made up of representatives of SIF, the Swiss Financial Market Supervisory Authority (Finma), the central bank SNB, as well as Patrick Odier, president of the Swiss Bankers Association and leading proponent of a Swiss trading hub for the Chinese currency renminbi.

Points Scored

Odier's bankers were the ones to achieve the most in the discussions with their Chinese colleagues, according to people familiar with the talks. Several Chinese banks enquired about the advantages of operating a branch in Switzerland, they added.

Thomas Sutter, deputy chief executive of the Swiss Bankers Association, confirmed this impression: «Several Chinese banking giants showed a vivid interest in Switzerland during the talks.»

The China Construction Bank (CCB) last spring applied for a Swiss banking licence with Finma, the first Chinese institute to do so for years. In the ensuing euphoria market sources purported the interest of three more Chinese banking giants to follow suit, the Bank of China (BoC), the Agricultural Bank of China (ABC) and the Commercial Bank of China (ICBC). Further institutes were said to entertain an interest in offering private-banking services in Switzerland.

Finma Decision Is Crucial

Nothing much has been heard about CCB's application since. Last week's negotiations showed that everything hinges on a decision about it. «Now it is important that the approval by Finma arrives,» a source close to the talks said. The other Chinese banking giants were waiting for the outcome of this test case before making any moves towards Switzerland.

And there's more. Without the banking licence for the CCB, there won't be a Swiss renminbi hub because CCB is required as clearing bank for the Chinese currency. The renminbi hub is a platform for the transaction of the currency, which up to now isn't freely convertible. It would thus facilitate business for the economy as a whole. Similarly, new financial products could be introduced and traded more easily.

G20 Invitation Sought

But it's not only Swiss banking, Switzerland also depends on the goodwill of the Chinese authorities on a much greater scale: the Swiss delegation inquired in Beijing whether China was inclined to invite Switzerland to next year's G20 summit. The People's Republic will host the 2016 gathering of the world's biggest economies and will write the guest list. Switzerland would like to make its voice heard, at least in financial matters.

Everybody is thus waiting for Finma to decide about CCB's application. There's enormous political pressure on Finma to accept the filing, according to an insider. The authority at the same time has to maintain the impression that the application has been vetted carefully and not just waved through double quick.

It Could Be November

«Finma doesn't speculate on the length of any particular application procedure,» a Finma spokesman told The complete dossier has been available to the authority since mid-May and was currently being evaluated, the spokesman added.

Finma on average takes about six months to vet an application for a banking licence, according to an expert on the matter. This suggests that a decision won't be available before sometime in November rather than in September as representatives of the Swiss financial industry had hoped. The suspense is set to increase in coming weeks.


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