Presentation on theme: "The Regulation of Foreign Banks in Switzerland ( )"— Presentation transcript:
1 The Regulation of Foreign Banks in Switzerland (1956-1972) Thibaud GiddeyThe Regulation of Foreign Banks in Switzerland ( )Foreign Financial Institutions and National Financial Systems2013 EABH Annual ConferenceWarsaw, 8 June 2013
2 Structure of the presentation The growth and specificities of the Swiss financial centre ( )Foreign banks in Switzerland: development, origin, motivationsReactions of Swiss authorities: dissuasive strategy followed by regulations.Conclusions
3 Source: Mazbouri/Guex/Lopez, Projet Place Financière Suisse.
4 Source: Mazbouri/Guex/Lopez, « Finanzplatz Schweiz », in Halbeisen/Müller/Veyrassat, Wirtschaftsgeschichte der Schweiz im 20. Jahrhundert, Zürich, 2012, p. 477
5 Source: Meyer, Max, Die ausländischen Banken in der Schweiz, 1975, pp
6 Source: Pecchioli, Rinaldo (éd Source: Pecchioli, Rinaldo (éd.), Les pouvoirs publics face à l’internationalisation des activités bancaires, Paris : OCDE, 1983, p. 72
7 National origin of foreign banks in Switzerland (as share of total assets of foreign banks) Source: 1958: Author’s calculations based on (E 6520(A), 1983/50, vol. 1, dossier « Ausl. Banken »). 1972: Meyer 1975, 24.
8 Attractiveness of Switzerland Liberal banking regulation:Low barriers to entry: minimal requirements.No separation of commercial and investment banking activities.Banking secrecyPolitical stability, neutralityGeographic position, multilingualismStability and strength of the Swiss francLenient tax systemReputation as a safe haven spared from warPrestige and competition reasonsSeveral internationally-active companies, especially in the commodity trade business
9 3. Reactions of Swiss authorities 3 phases: : appearance of the ‘threat’ of foreign banks, dissuasive tactics : financial scandal, increase of the number of foreign banks, soviet-bank : parliamentary intervention, federal decree ‘establishing the system of license for foreign-controlled banks’
10 3. Reactions of Swiss authorities (1956-1965) Arguments against new foreign banksSwiss Bankers Association:Threat to the reputation of the Swiss financial centreIncreased competition in the wealth management marketPresence of foreign banks could amplify international restrictions on the entire banking industry.Domino effectOverbanked market, lack of qualified staff, wage inflationSwiss National Bank:Inflationary effects due to the inflows of foreign capital through the foreign banks
11 3. Reactions of Swiss authorities (1956-1965) Measures to take against foreign banksRegulatory change could lead to unwanted reforms: avoid legal modification by adopting a dissuasive strategy (indirect obstacles):Refuse the opening of interbank payment accounts by the central bankRestrictive policy in the granting or extending of residence permitsFoot-dragging tactics in the processing of requests
12 3. Reactions of Swiss authorities (1965-1967) April-July1965 : “Muñoz Scandal” March 1966 : opening of the Wozchod Handelsbank AGRevision process of the banking law initiated in 1966Swiss Bankers Association makes the question of foreign banks its hobby-horse in case of a revision of the banking law.
13 The system of licenses for foreign-controlled banks (21 march 1969) 4 conditions to meet in order to obtain a license:Reciprocity should be granted to Swiss banksCompany name should not suggest any Swiss originInopportune advertisement with the Swiss head office should be avoidedRespect Swiss monetary policy
14 Effects of the new regulation In the short-term, no reduction of the number of requests ( ).Reciprocity = only condition that could actually justify the refusal of a request.Creation of the Association of Foreign Banks in Switzerland in 1972.
15 ConclusionsThe passing of the 1969 decree met the needs of Swiss banking interests in four ways:Attempt to quickly limit the expansion of new competitors without necessarily questioning the very liberal regulatory frameworkThe question of the limitation of foreign banks played an important role in the delay in the revision process of the banking law.
16 ConclusionsEffort to silence international criticism directed against the Swiss banking haven, by imposing slightly higher entry conditions for foreign banksReciprocity clause used simultaneously as a protectionist measure to prevent the establishment of new competitors and as a diplomatic tool for the expansion of Swiss banks. In fact, the expansion of the international network of Swiss banks took place mainly in the 1970s.
19 Site selection of Switzerland according to a survey of foreign banks in 1972 Source: Meyer 1975, p. 14.
20 Présence internationale des grandes banques suisses en 1969
21 Types d’activités des banques étrangères en Suisse Exécution de transactions financières et commerciales avec le pays d’origineOpérations de financement international. CH = plaque tournanteOpérations sur l’or et les devisesOpérations d’émissions internationalesGestion de fortune et gestion de fonds de placementPas de banques de détail, ni d’opérations sur le marché intérieurDe manière générale, les banques étrangères pratiquent en Suisse les activités bancaires qui ne sont pas autorisées dans leur pays d’origine ou qui y sont moins rentables (p. ex. gestion de fortune, financement du commerce international)
22 Politique bancaire en Suisse Banque nationale suisseCommission fédérale des banquesAssociation suisse des banquiersAdministration fédérale des finances
23 Foreign banks : 4 types of establishment Representative office (german: Vertretung, french: représentation)Branch (german: Filialen, french: succursale)Subsidiary company (german: Zweigniederlassung, french: filliale)Foreign-controlled banks (german: ausländisch beherrschte Banken, french: banques de droit suisse en mains étrangères).