Credit Suisse Study on the Swiss Financial Center – 2016 Edition Freitag, 17. Juni 2016 - 12:30

Urs Rohner, Chairman of the Board of Directors of Credit Suisse Group AG, initiated this series of publications with the goal of inspiring thought that could contribute to the long-term strengthening of our financial center's international competitiveness: "All relevant interest groups – the banks themselves, but also political decision-makers and supervisory authorities – will have to make their own contributions. For this reason, we are presenting specific recommendations for courses of action for the various actors, to be updated on an ongoing basis."

Trends, Success Factors, and Recommendations
The study reviews the most important developments over the last two years from the perspective of the Swiss financial center, compares the positioning of leading international financial centers, and explores key trends. The trends identified in previous years have largely been confirmed, and in some cases clearly accentuated. The continuing growth of assets to be managed in developing Asian countries and the digitalization of banking business remain two of the most important trends. Sustainable investing has registered consistent growth in recent years, and the Swiss financial center has also benefited from this.

From these trends, several central future success factors for the Swiss financial center can be identified: 

• Constructive approach to dealing with low interest rates
• Pragmatic regulation
• Securing and improving market access abroad
• Further increase in general locational attractiveness
• Successful management of digitalization
• Stronger anchoring of sustainability in client offering

Focus on the Impact of Negative Interest Rates
In terms of the macroeconomic environment, the period of low interest rates has actually given way to a phase of negative rates, which is why the study devotes increased attention to low and negative interest ratesand their impact. This is due to the fact that negative interest rates change the behavior of CHF investors and banks. Particularly of note in the context of negative interest rate policy are the real estate market and reductions of pension fund benefits.

Swiss "Too Big to Fail" Policy on the Global Leading Edge
Regulatory standards for banks have been significantly strengthened worldwide. Switzerland is an international leader in the area of too-big-to-fail regulation. This applies to Swiss requirements both in risk-weighted areas and in reference to the comparison of balance sheet sizes. The additional capital reserve required makes a bailout by taxpayers even less likely. In addition, major banks' balance sheets have been significantly reduced. Switzerland has also rapidly and comprehensively implemented new rules on the automatic exchange of information, while the final stage of modernizing financial market regulations is still pending.

So, it was a logical conclusion for Switzerland's two major banks to establish independent Swiss legal entities, including systematically important functions. The Swiss home market is of central importance to Credit Suisse, as Thomas Gottstein, CEO of the Swiss Universal Bank of Credit Suisse, has affirmed: "The trends revealed by the study confirm our strategy. We want a secure, well-capitalized bank that has a clear focus on Switzerland while remaining globally networked. This is of central importance in order to successfully advise the Swiss economy, Swiss companies, and Swiss entrepreneurs. Our desire is to be a 'Bank for Entrepreneurs.'"

Positioning in the Areas of Digitalization and Sustainability Is of Central Importance
In an environment defined by extremely low interest rates and tightened regulation, Swiss banks need to pursue new business lines. In particular, the continuous advancement ofdigitalization offers a number of opportunities. Digitalization of the financial world stands to substantially alter the banking business: from payment operations to digital trading and advisory platforms to virtual currencies and application in the compliance area (RegTech). Rationalization of processes in the banking sector as well as consolidation of and changes to distribution channels are expected in the future. The client-bank relationship will also be fundamentally changed by the strengthening of the position of clients. Continuous, concentrated efforts are required in order to put Switzerland on the map in the area of digitalization because Swiss FinTech initiatives still remain relatively fragmented by comparison.

An additional, increasingly important topic – that of sustainability and the business opportunities that result from it in the financial industry – will be analyzed in depth for the first time in the current study. Switzerland is well positioned to benefit from the related trends and should take advantage of them to further strengthen its internationally recognized status in sustainable finance. In contrast with other financial centers, private investors in Switzerland play a relatively important role in the area of sustainability. The increase in the share of institutional investors also presents a significant opportunity for growth. Here, Switzerland can develop its distinctive strengths, namely in the field of microfinance and other "impact investment" areas. Swiss Sustainable Finance now serves as an appropriate platform for this area.

After a brief look at selected international finance centers, the publication offers specific recommendations for action, divided into those aimed at state councils, the Federal Assembly, and supervisory authorities on one hand, and banks and business on the other.

This year's edition of the "Swiss Financial Center" study is available online in German, French, and English at: Credit Suisse Study on the Swiss Financial Center (Swiss economy)