In the competition between financial centers, Switzerland and Great Britain are rivals. But now the British are opening their arms wide – as will probably be seen again at today's ministerial meeting between the two countries.
Today, Wednesday, it's time for another magisterial video call between Switzerland and the U.K. The two finance ministers, Ueli Maurer and Rishi Sunak (pictured below) will use the online channel to talk about financial center issues – and in the process realize that they are moving ever closer together despite being hundreds of kilometers apart.
Both negotiating partners can make good use of each other right now. The Swiss government wants to finally conclude the institutional framework agreement with the EU in 2021. The U.K.'s exit from the EU has stood in the way of these negotiations in the past. Now that Brexit has been completed at the end of 2020, at least this obstacle will fall away. Swiss diplomats have also received an object lesson in how to proceed vis-à-vis the powerful union.
(www.gov.uk)
Mutual Stock Exchange Equivalence
In the past, the EU punished Switzerland for the delays surrounding the framework agreement by withdrawing stock exchange equivalence. The loss of stock exchange volumes from the EU is a problem now also facing the British financial center and Chancellor of the Exchequer Sunak: The City of London suddenly lacks 4.6 billion euros in trading volume – per day, as «Bloomberg» (behind paywall) reported.
Switzerland can help out here. Maurer and Sunak have already worked out that the U.K., which is now no longer part of the EU, will restore «stock exchange equivalence» with the Swiss Confederation and allow trading in Swiss securities. This is to take place on February 3, and Switzerland is likely to reciprocate in kind. London trading in Swiss-listed shares previously accounted for 1.3 billion euros per day, so cannot replace EU volumes for the British.
In the Spirit of F4
To that end, Sunak is now tipped to break down more barriers between the U.K. and Switzerland. According to «Bloomberg», Wednesday's talks will also revolve around how to lower costs and barriers for British and Swiss financial services providers in each other's countries. The focus will be on banks, insurers, the fund business, and the capital market business.
This has been in the pipeline since 2016, with the Swiss Bankers Association leading the way in forging the «F4» alliance of global financial centers outside the EU, prompted by the Brexit negotiations. The four locations of Switzerland, the U.K., Singapore and Hong Kong were to stand up to the global competition one day.
Mind the Gap
These plans were taken up by officials and pushed forward in 2019. Under the title «Mind the Gap», various agreements were initiated between Switzerland and the United Kingdom that were to take effect after Brexit. Now would be the time for that.
Meanwhile, Sunak is separately making plans to attract new business to the City of London. Not only are new markets such as sustainable finance to be pushed forward – tax giveaways and deregulation for financial market players of the kind last pushed in the 1980s by then-Prime Minister Margaret Thatcher under the title «Big Bang» are being discussed.
The effect on Swiss financial policy is likely to be interesting: until now, the latter has sought to facilitate access to the European market via the highest possible conformity (equivalence) with EU financial directives.
Admiration for Singapore
Many players regard another F4 financial center as a role model: Singapore has been enormously accommodating to the financial industry in setting up shop and is a master at quickly implementing the latest financial trends, with government and regulators each unabashedly throwing their weight around as promoters.
The West's sometimes clumsy wrestling with the pandemic, political upheavals in the U.S. and Europe, and China's stranglehold on Asian archrival Hong Kong have given the «Singapore model» a further boost. It is no coincidence that the WEF is not physically being held in Davos this year, but in May in the virtually Corona-free Asian city-state.
