We stand a better chance of keeping private banking clean if we regulate our financial-services industry with some common sense instead of with a set of new laws, writes Arthur Bolliger in an exclusive essay for finews.first.


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Back in Trogen, a town in my home county of Appenzell Ausserrhoden in Switzerland, there is a busy junction, where four main roads meet. The considerable amount of traffic is regulating itself without the help of a traffic light.

Years ago, a citizen with good intentions demanded the town council to do something about this dangerous junction and to make it safer. The head of the community, a wise man, answered: «No. We will leave traffic at this junction unregulated. The urgent dangers facing the road users make them use much more care and restrain themselves to an extent that no accident ever happens.»

Of course, Trogen isn't the only place where non-regulation of traffic is seen as beneficial. The city of Drachten in the Dutch province of Friesland has some 60,000 citizens. Drachten is a participant in the European Union project called «Shared Space». In line with the concept of the project, the council removed both traffic lights and signs in the city center.

«Moral principles can't be enforced in society by exorcizing self-interest and obstinacy»

No curbstone is separating pavement from road and both are at the same level. The markings between the space reserved for pedestrians and the roads have been removed. Today, there are only two rules guiding traffic: the right of way and the speed limit of 30 km/h. Since the city joined the project, the number of accidents has declined drastically with hardly any occurring nowadays.

The dangerous junction in Trogen and the model implemented in Drachten take their cue from the great liberal idea of the freedom and responsibility of the citizen. Adam Smith more than 200 years ago spoke about an invisible hand steering self-interested egos in the direction of a common spirit.

Moral principles can't be enforced in society by exorcizing self-interest and obstinacy. The more room individuals get to agree on rules about their interaction, the more likely it is that they will stick to the agreements they make.

Unfortunately, these ideas today are regarded as naive and utopian. And as an expression of «neoliberal» eccentricity.

Ethics and a sense of responsibility of citizens decrease the more rules we have in everyday life. We rely upon the state to put in order everything that needs order.

Hans Monderman, a traffic engineer instrumental in the setting up of «Shared Space» in Holland, coined the phrase: «Traffic has to be made dangerous to become safe.»

An idea that sounds paradoxical at first but makes sense if one starts reflecting upon it. Once the traffic light switches to green, you know that the priority is all yours and you will accelerate immediately – which in turn will make you notice too late, if another road user doesn't adhere to the rules. «Most accidents occur not because of your mistakes but because you don't correctly react to mistakes by others,» Monderman said.

«The attorney general is spot on in his analysis of what is essential»

So what should the designers of Switzerland's new Financial Services Act learn from dangerous junctions in Trogen and unregulated traffic in Friesland? The insight that too much regulation and control will blank out the truly important from our vision.

Switzerland's attorney general, Michael Lauber, in an interview with «Sonntagszeitung» on April 10, 2016, said, answering a question about whether there are too many rules: «Rules are fine. But there's the danger that the essential issue, 'know your customer', is being delegated to a piece of paper. For instance, faced with a flood of duties and forms, lawyers and financial intermediaries tend to forget to ask themselves the really basic question, namely, does the case in question make sense economically.»

The attorney general is spot on in his analysis of what is essential. We have a better chance of keeping private banking clean if we regulate our financial transactions and money flows with common sense.

We can build favorable conditions for customers and keep our financial market clean if we stop having the client sign 30 pages of forms when he merely wants to open an account and stop demoting the client adviser to a being a bureaucrat ticking boxes answering question that make little sense.

Many Banks say: «If ten policemen don't suffice, we will add another twenty»

Today, the banks say: «If ten policemen don't suffice, we will add another twenty. That way we can prove to the financial regulator that we take seriously the fight against illegal and unwanted business. And, should something go wrong, we can't be blamed.»

In other words: We've forgotten that our constitution says right up front in paragraph 5.3: «The organs of the state and private citizens act in good faith.» In 2012, the Swiss Post issued a special stamp commemorating the principle of good faith. Simonetta Sommaruga, our justice minister, said at the time that this principle demanded for mutual respect and that it protected the sense of trust in each other. How true!

To be sure: The principle of good faith may sound a little utopian in today's financial-services industry, faced as we are with old and new scandals. Finma, the regulator, does what is required by law (and foreign authorities), it regulates. The financial-services industry is playing along for better or worse, because opposition isn't according to the spirit of our times.

«Let us allow more unguarded junctions!»

Reason aplenty for the liberal majority to take issue! In a way that doesn't force consumers to buy what they don't understand and without destroying the comparative advantages of our financial market. And in a way where the state does not assume it knows what citizens ought to do with their money.

Let us allow more unguarded junctions! Let us make life more dangerous in a bid to make it safer!

No question, non-regulation is risky. But overregulation is riskier. And it endangers the freedom of the individual and our society. Thus, a highly political and contentious question that parliament has to take issue with! As Montesquieu said: «Quand il n’est pas nécessaire de faire une loi, il est nécessaire de ne pas en faire.»


Arthur Bolliger, born in 1948, spent a quarter of a century at Zurich-based Maerki-Baumann Group. From 1989 through 2008 he managed the Maerki Baumann private bank as chief executive, and from 2009 through 2011 he chaired the board of InCore Bank, which belongs to the same group of banks.

Bolliger today is member of the boards of several companies, including Banque Cramer in Geneva. He is also active supporting the Zurich University of the Arts, Swisscontact and acts as president of Cheira, a Swiss humanitarian surgery.


Previous contributions: Rudi BogniAdriano B. Lucatelli, Peter Kurer (twice), Oliver Berger, Rolf Banz, Dieter Ruloff, Samuel Gerber, Werner Vogt, Claude Baumann, Walter Wittmann, Albert Steck, Alfred Mettler, Peter Hody, Robert Holzach, Thorsten Polleit, Craig Murray and David Zollinger.