New EU rules could mess up Swiss banks’ affairs Foxconn workers flee Corona building lockdown

There was a time when a bank account in Switzerland was just a matter of course for people with a lot of money. And even after the end of banking secrecy, Swiss financial institutions are still very popular with clients from all over the world: Switzerland is the global market leader in cross-border asset management.

In Europe, many of the rich and super-rich from Germany use Swiss services. The reasons are the political stability, the safe franc and the expertise of the Swiss bankers.

On-site customer support – no longer from Paradeplatz

But that could soon be over. New EU rules could mean that Swiss banking institutions can no longer serve customers from the EU as usual. Specifically, a proposal to revise the EU capital regulations (Capital Requirements Directive) stipulates that a Swiss bank must open a new physical branch in the EU in order to serve customers there.

For major banks such as Credit Suisse and UBS, this is less of a problem, as they already have EU subsidiaries. Smaller private banks would be affected by the new establishment requirements. Their facilities would also have to be substantially equipped with capital and personnel. Many cannot and do not want to pay that.

On the other hand, many customers don’t want that either: they explicitly want to be looked after by Swiss bankers from Switzerland. In addition to investing in Swiss francs, it is also important that Switzerland, as a non-EU member, forms a different jurisdiction.

About 20,000 jobs depend on cross-border asset management

If the new EU rules are implemented according to plan, it would be fatal for the Swiss banking center. In fact, EU market access in cross-border asset management would be questioned.

It is about a lot of money, jobs and value creation in Switzerland: 20,000 jobs depend on the asset management of some 1,000 billion from other EU countries. According to figures from the Association of Swiss Asset Management and Wealth Management Banks (VAV), approximately CHF 1.5 billion in tax revenue is generated through so-called “offshore banking”.

The EU is also pushing for the new rules to bring back some of the business that has migrated to international financial centers. It’s not even about Switzerland. But about all third countries and in particular about the United Kingdom, which has become a structural competitor in the financial services after Brexit. Switzerland, which has not concluded a comprehensive financial services agreement with the EU, is becoming collateral damage, as it were.

The new rules won’t come into effect before 2026 – if at all

But nothing has been decided yet. Next week, the economic affairs ministers of the EU countries will discuss the European Commission’s proposal for the first time. While the EU parliament usually positions itself even more strictly than the EU commission, there is resistance to the planned harmonization between member states, especially from Germany. It remains to be seen whether the new regulations will come to pass as proposed by the European Commission in October a year ago. If an agreement is reached in mid-2023, as planned, the new rules could enter into force by 2026.

The Swiss Bankers Association is cautious and refers to the ongoing process of opinion-forming in the EU. Apart from that, it has “remained convinced that granting cross-border market access to the EU contributes to open and integrated markets and is thus in the interest of EU investors and ultimately in the interest of the EU,” said a spokesperson. (cpf/aargauerzeitung.ch)