Swiss cantonal banks – retail banks owned by their respective regional governments – are doing rather well. But their privileges are increasingly being questioned.
The case of a top representative of one of the two big Swiss banks is rather symptomatic. At a press conference, he used strong language to underline what he thought about the privileges of cantonal banks. It simply beggared belief just how little those banks paid out as dividends, given that they didn’t have to pay any taxes, he complained, adding that it seemed incredible to him that state and shareholders accepted this policy.
His audience was left pretty surprised at the outburst. The privileges of the 24 Swiss cantonal banks – of which 21 have a so-called state guarantee – are well known in the country and have always been confirmed by the political masters and the regulator. Naturally, there have been occasional complaints along the lines that state guarantees belonged to the past, because they amount to a distortion of competition.
From the outset, there are few reasons for a sudden outburst against the state bank system in Switzerland. But the signs were there all the same.
Breaking With Taboos
Patrick Odier, the senior partner at private bank Lombard Odier in Geneva, recently penned an opinion piece for «NZZ», where he spoke up in favor of the framework agreement with the European Union. He said the new contract was essential for Swiss banking – even if it may put in question the state guarantees for cantonal banks. It was well worth discussing this issue instead of simply qualifying it as a taboo, he suggested. «If we protect everything, but end up having no jobs left, we haven’t gained anything.»
Odier is representing the export side of banking – global wealth management – a business that profits the most from good relations with the EU. Domestic players, such as cantonal banks, are more critical of cross-border regulation. This difference of interest has already been a source of disagreement in Swiss banking in the past.
Political Support
Are the main exponents of big and private banks about to join forces against the interests of state institutes? The association of Swiss cantonal banks isn’t overly worried about the prospect. «Objections against the status of cantonal banks aren’t new,» a spokesman said. The political support remained steady, he added, showing that state guarantee and the compensation paid for it remained well balanced. The guarantees therefore didn’t come to be seen as anti-competitive in nature.
The relaxed attitude of the association may soon be tested.
EU Objections to State Aid
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