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What is the perception of banks in Switzerland? Exploring Swiss public opinion
Byline article by Denis Pittet, Lombard Odier Managing Partner and President of the Fondation Genève Place Financière, in Le Temps – 05.08.2024
Switzerland is synonymous with chocolate, watchmaking and, of course, banking. In recent decades, the Swiss banking sector has been faced with many challenges, but the industry continues to adapt. Not only do banks remain an important economic force, they are praised by the public who appreciate their solidity and quality of service.
For over 20 years, the Swiss Bankers Association (SBA) has commissioned a bi-annual opinion poll, via an independent 3rd party, on the image of Swiss banks. It aims to take a pulse check on how the Swiss population perceive the country’s banking institutions and their economic role.
At a time when the financial industry is experiencing turbulence, Swiss public opinion deserves particular attention. Has the Credit Suisse crisis left its mark? How does the population view the measures taken by the Federal Council in this context? And what is the public’s perception of the competitiveness of the Swiss financial centre?
Renewed confidence...
From the outset, the overall view remains relatively stable and positive. 60% of the Swiss population rate the banking sector favourably. This shows that the Swiss are cognisant of the sector’s role in relation to Switzerland’s prosperity and economic position. In fact, banks are one of the top three contributors to the Swiss economy, and this is particularly true for Geneva, where the financial sector accounts for more than 13% of its GDP and provides around 38,000 jobs. This represents 10% of all jobs in the canton.
According to the survey, the quality of customer service sets Switzerland apart from its foreign competitors. Also, political and economic stability allow the Swiss financial centre to position itself among the best on the international scene. Furthermore, the younger generation is the most optimistic about the future of the financial sector. Their outlook remains positive especially in regard to sustainability.
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Despite this encouraging feedback – there is no reason to be complacent. Confidence must be earned.
...but not a given
Over the past twelve months, the majority of Swiss citizens say they have followed news reports relating to banks, with the focus, unsurprisingly, on the Credit Suisse crisis. While the Confederation’s actions have been widely accepted, a third of Swiss people are sceptical about the UBS takeover and are concerned by the risk that such a large new bank poses to the country. On the other hand, three quarters of the population believe that this crisis should not be used to further regulate the Swiss economy as a whole. Therefore, they are not giving in to the siren calls of over-regulation.
The implementation of the Federal Council’s “Too big to fail” report represents an opportunity to respect the will of the people. On 10 April this year, the Federal Council proposed a package of measures based around three pillars.
Firstly, it focusses on prevention by introducing a system of liability for directors and regulation of variable remuneration. In addition, systemically important banks will have to meet increased capital requirements in terms of both quality and quantity.
Secondly, these proposals will considerably extend the SNB’s liquidity supply options and a public liquidity backstop mechanism (PLB) will also be enshrined in ordinary law.
Thirdly, in the event of a crisis, systemically important banks should be able to exit the market in an orderly manner. In this respect, cooperation between the authorities involved in planning a possible liquidation will need to be examined and, if necessary, regulated more clearly.
The end of the “Swiss finish”
In implementing these measures, a number of key principles should be observed. Improved liquidity provision by the SNB for all banks must be a top priority as well as the introduction of a PLB for systemically important banks. Similarly, the principle of proportionality must be systematically observed when drawing up any new regulations. This also requires a cost/benefit analysis of the legal provisions envisaged. Finally, maintaining the international competitiveness of the Swiss financial centre needs to remain a constant priority.
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On this basis, and taking into account the upcoming conclusions of the parliamentary committee of enquiry, it will be up to the Federal Council to amend the ordinances for which it is responsible. Legislative amendments will then be submitted to the Federal Parliament. Hopefully, Swiss pragmatism will prevail here. It would be counterproductive if Swiss perfectionism led to the introduction of a stifling, regulatory straitjacket.
A survey reflecting Swiss common sense
The SBA’s 2024 survey shows that the Swiss have confidence in their banks. And the respondents are also keenly aware of the regulatory challenges facing a sector that has been hit hard by the Credit Suisse crisis. They see both the opportunities and risks whilst arguing for the right balance between risk management and attractiveness.
That’s the subtlety of the Swiss compromise!
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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