European Interest

Brexit is bad for Swiss bankers

Flickr/losvizzero/CC BY-NC-ND 2.0

Britain’s plans to leave the European Union are putting a dent to Swiss bankers’ hopes of securing improved access to EU markets.

In an interview with the Financial Times, Herbert Scheidt, chairman of the Swiss Bankers Association, warned Brexit had politicised technical talks about encouraging business across the Swiss-EU border. “It makes it harder to improve market access at the speed we had hoped before Brexit.”

Despite being surrounded by EU countries, Switzerland is not a member of the bloc. However, it has signed more than 120 bilateral agreements and enjoys a special economic relationship with the EU.

Brussels fears any concessions given now to Switzerland could set a precedent for the Brexit talks, bankers in Zurich believe. “The EU cannot grant Switzerland something while still negotiating with the UK,” said one banker.

According to the Financial Times, Switzerland is the world’s largest manager of cross-border wealth, but its bankers’ direct access to potential clients in EU markets is restricted — although larger banks especially can circumvent the constraints by having units located in EU countries.

However, before agreeing new market access deals, Brussels wants Switzerland to reorganise its EU relationships around an “institutional framework” agreement by which Swiss rules would change automatically in line with EU changes, and disputes would be resolved via mechanisms involving the EU judges.

Such plans are controversial in Switzerland where voters reject the jurisdiction of “foreign judges”.

To increase the pressure on Bern, the EU last December announced it would allow European and Swiss equities traders access to each others’ markets for just 12 months. It remains unclear what will happen after that. Bern denounced that move by Brussels as “unacceptable” discrimination.

“It was a very short term decision,” Scheidt said. “We have heard that it was because negotiations on an institutional framework had not moved forward – but that was never mentioned when we were in Brussels in late October, shortly before the decision.”

Another potential flashpoint is access for Switzerland’s alternative investment fund managers. Fund managers had hoped the Swiss regulatory regime would be declared “equivalent” to the EU’s Alternative Investment Fund Managers Directive, which would allow Swiss-based asset managers to sell directly into the EU.

Despite the challenges, Scheidt believes a full financial services deal between Switzerland remained a “strategic option”.

Asked if such a proposed deal had become a casualty of Brexit, he said: “Brexit always enters the discussions – it is going to change Europe. But it did not have a specific impact [on the discussions of a financial services agreement]… You have to look at the whole picture of what is politically feasible.”

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