The radically changed geopolitical environment has led to unparalleled uncertainty – and two very big problems for Swiss private banks.
The entire world has turned upside down in just a few months. Until recently, many Swiss private banks were basking in the record highs of 2021. But now they face an uncertainty so all-encompassing that it bears few parallels with anything experienced in the past.
There was very little talk of regulation, digitalization, and banking secrecy at the sixth annual Private Banking Day last Friday in Zurich. Instead, conversations were focused on two distinct issues.
No Market Access
The first one. For years, banks have not had any access to the EU market unless they were tangible bricks and mortar on the ground. But not having actual in-country operations goes against the principle of reciprocity given that foreign institutions encounter few obstacles when banking the Swiss market.
This can all be put down to the fact that certain EU members rely on their domestic legal framework and give little indication of wanting to change anything. They are in effect protecting their finance sectors.
Small Banks at a Clear Disadvantage
The situation is particularly glaring in Italy, where banks without any domestic branches have no access. That is a massive disadvantage for small banks, as Geneva private banker and part-owner of Pictet, Bertrand Demole, said in a panel discussion.
It would fundamentally be the role of the government to find a solution. But the relationship between Switzerland and the EU has cooled significantly since negotiations were broken off over a framework agreement. That means that there is zero chance of any new regulation.
«We Have to Raise Our Voices»
There is a certain irony in the fact that the Ukraine invasion has prompted renewed momentum in the relationship between Switzerland and the EU – not least because Switzerland more or less adopted the EU's extensive sanctions in full. Philipp Rickenbacher, CEO of Zurich-based Julius Baer and chairman of the VAV-ABG asset/wealth association, called for a new round of finance sector negotiations with the EU, just like the electricity and the medical technology branches are undertaking.
EFG-International CEO Giorgio Pradelli said much the same. He indicated that Switzerland had been too naive in the past and did not fight enough for reciprocity.
«We have to raise our voices», he said, referring to the recent Boston Consulting Group (BCG). That report is forecasting that the Asian financial hubs of Hong Kong and Singapore will overtake Switzerland as an off-shore center by 2026, as finews.com reported.
Concerns About Sanctions
The second worry is about Russian sanctions. Implementing them is extremely complex, emphasizes Marc Bürki, founder and CEO of Swissquote, an online bank. Demole agreed, saying that Switzerland had previously levied sanctions against individual countries but the extent of the current regime against authorities, institutions, and individuals is unprecedented.
The private bankers were very conscious of the fact that significant assets were shifting to Dubai as a result of the sanctions, which would also serve to weaken the finance sector. Neutrality was becoming an increasingly difficult balancing act in a world dominated by conflicting blocks, Rickenbacher indicated. Still, Switzerland must continue to follow its own independent sanctions policies that respect the rule of law.
«Cooperative Neutrality»
Federal Councilor Ignazio Cassis, talking on video, said neutrality does not mean being indifferent. The country will also remain neutral but the policy has to adjust to current realities in the form of a «cooperative neutrality» given the country is integrated into Europe.
All the private bankers said they were facing massively increased demand for explanations from clients. And the way that Switzerland adopted the EU sanctions surprisingly quickly and comprehensively did not pass them by, says Geneva-based private banker Grégoire Bordier, one of the partners of the bank bearing his family name and chairman of the Association of Swiss Private Banks (ASPB).
