Political unwillingness hampers Swiss access to France and Italy's financial sector, the Swiss government says. That leaves a great deal at stake.

Swiss financial institutions have not been able to access markets in France or Italy through Ticino for a few years now. The reason is 2017's implementation of the EU's Mifid II directive preventing anyone from being active in markets where they do not have a direct presence.

This contrasts with Germany, where Swiss institutions enjoy a simplified exemption from the requirement from BaFin, the country's federal financial supervisory authority. Zurich-based bank Maerki Baumann (finews.ch, German only), as an example, recently received such an exemption.

Economic Considerations

This impacts Lugano deeply given that most of the banks and asset managers there previously generated most of their revenues with Italian clients. That all stopped with Mifid II, significantly endangering finance sector jobs, the hub's existence and its future, Alberto Petruzella, President of the Ticino Bankers Association (ABT), stated when asked by finews.com.

For many institutions, the costs of operating a branch in Italy are prohibitive on economic grounds and in most cases, it doesn't tally up with the business models and strategies they employ.

New Scenarios

A number of representatives and lobby groups from Ticino have asked the government in Berne to look into the situation, including an official statement by Ticino member of parliament Giovanni Merlini in September 2017.

He asked the Federal Council to draft a report that looked at different scenarios for the Ticino and Geneva financial sectors, including measures that looked at providing access to the French and Italian markets more easily.

Resistance in France and Italy

The directive does not fully preclude direct bilateral agreements with individual EU countries such as France and Italy although they would have to be based on mutual recognition.

Both France and Italy have decided against making such agreements with other countries. In other words, they are holding fast to the model of requiring a branch presence. And at the EU level, there is no equivalence regime in the finance sector that would allow for cross-border market access.

Tight Limits

The Federal Council's response to Merlini said that cross-border access for Swiss asset managers was not foundering on legal considerations - but that they were dependent on the political will of individual EU countries.

Economic and political considerations likely play a strong role, particularly Italy and France's interest in serving domestic clients internally as that guarantees both jobs and tax revenue. «With that, any scenarios and strategies on the Swiss side are very limited,» the Federal Council said in its response to Merlini.

Little Comfort

It is of little comfort that Switzerland continues to strive for market access in the asset and wealth management sector through a diverse set of bilateral measures with Italy and France.

As, in the long term, the future of the country's second and third largest financial hubs, Geneva and Lugano, will still be at stake.