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The Regulation of Foreign Banks in Switzerland (1956-1972) Thibaud Giddey Foreign Financial Institutions and National Financial Systems 2013 EABH Annual.

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Presentation on theme: "The Regulation of Foreign Banks in Switzerland (1956-1972) Thibaud Giddey Foreign Financial Institutions and National Financial Systems 2013 EABH Annual."— Presentation transcript:

1 The Regulation of Foreign Banks in Switzerland ( ) Thibaud Giddey Foreign Financial Institutions and National Financial Systems 2013 EABH Annual Conference Warsaw, 8 June 2013

2 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 2 Structure of the presentation 1. The growth and specificities of the Swiss financial centre ( ) 2. Foreign banks in Switzerland: development, origin, motivations 3. Reactions of Swiss authorities: dissuasive strategy followed by regulations. 4. Conclusions

3 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 3 Source: Mazbouri/Guex/Lopez, Projet Place Financière Suisse.

4 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 4 Source: Mazbouri/Guex/Lopez, « Finanzplatz Schweiz », in Halbeisen/Müller/Veyrassat, Wirtschaftsgeschichte der Schweiz im 20. Jahrhundert, Zürich, 2012, p. 477

5 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 5 Source: Meyer, Max, Die ausländischen Banken in der Schweiz, 1975, pp

6 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 6 Source: Pecchioli, Rinaldo (éd.), Les pouvoirs publics face à linternationalisation des activités bancaires, Paris : OCDE, 1983, p. 72

7 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 7 National origin of foreign banks in Switzerland (as share of total assets of foreign banks) Source: 1958: Authors calculations based on (E 6520(A), 1983/50, vol. 1, dossier « Ausl. Banken »). 1972: Meyer 1975, 24.

8 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 8 Attractiveness of Switzerland Liberal banking regulation: –Low barriers to entry: minimal requirements. –No separation of commercial and investment banking activities. –Banking secrecy Political stability, neutrality Geographic position, multilingualism Stability and strength of the Swiss franc Lenient tax system Reputation as a safe haven spared from war Prestige and competition reasons Several internationally-active companies, especially in the commodity trade business

9 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 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 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) Reactions of Swiss authorities ( ) Arguments against new foreign banks Swiss Bankers Association: –Threat to the reputation of the Swiss financial centre –Increased competition in the wealth management market –Presence of foreign banks could amplify international restrictions on the entire banking industry. –Domino effect –Overbanked market, lack of qualified staff, wage inflation Swiss National Bank: –Inflationary effects due to the inflows of foreign capital through the foreign banks

11 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 11 Measures to take against foreign banks Regulatory 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 bank Restrictive policy in the granting or extending of residence permits Foot-dragging tactics in the processing of requests 3. Reactions of Swiss authorities ( )

12 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 12 April-July1965 : Muñoz Scandal March 1966 : opening of the Wozchod Handelsbank AG Revision process of the banking law initiated in 1966 Swiss Bankers Association makes the question of foreign banks its hobby-horse in case of a revision of the banking law. 3. Reactions of Swiss authorities ( )

13 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 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 banks Company name should not suggest any Swiss origin Inopportune advertisement with the Swiss head office should be avoided Respect Swiss monetary policy

14 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 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 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 15 Conclusions The passing of the 1969 decree met the needs of Swiss banking interests in four ways: 1. Attempt to quickly limit the expansion of new competitors without necessarily questioning the very liberal regulatory framework 2. The question of the limitation of foreign banks played an important role in the delay in the revision process of the banking law.

16 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) Effort to silence international criticism directed against the Swiss banking haven, by imposing slightly higher entry conditions for foreign banks 4. Reciprocity 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. Conclusions

17 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 17 Thank you for your attention !

18 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 18

19 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 19 Site selection of Switzerland according to a survey of foreign banks in 1972 Source: Meyer 1975, p. 14.

20 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 20 Présence internationale des grandes banques suisses en 1969

21 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 21 Types dactivités des banques étrangères en Suisse Exécution de transactions financières et commerciales avec le pays dorigine Opérations de financement international. CH = plaque tournante Opérations sur lor et les devises Opérations démissions internationales Gestion de fortune et gestion de fonds de placement Pas de banques de détail, ni dopérations sur le marché intérieur De manière générale, les banques étrangères pratiquent en Suisse les activités bancaires qui ne sont pas autorisées dans leur pays dorigine ou qui y sont moins rentables (p. ex. gestion de fortune, financement du commerce international)

22 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 22 Politique bancaire en Suisse Banque nationale suisse Commission fédérale des banques Association suisse des banquiers Administration fédérale des finances

23 8 June 2013 The Regulation of Foreign Banks in Switzerland ( ) 23 Foreign banks : 4 types of establishment 1. Representative office (german: Vertretung, french: représentation) 2. Branch (german: Filialen, french: succursale) 3. Subsidiary company (german: Zweigniederlassung, french: filliale) 4. Foreign-controlled banks (german: ausländisch beherrschte Banken, french: banques de droit suisse en mains étrangères).


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