Next week marks the begin of a project to reform cross-border assets in Europe. If a tightening is the outcome of the meeting, the flow of German money into Swiss banks could dry up over time.
A planned tightening of EU directives is casting its shadow over the Swiss financial center. The hundreds of billions of francs worth of German assets booked with Swiss banks could be affected as a result.
The bone of contention is the German regulation under which banks from third countries - such as Switzerland - are granted a so-called «exemption» to do business in EU states, as long as the financial institutions adhere to certain regulations and are well supervised in their home country.
Ticket to Germany
With this exemption, Swiss banks can proactively solicit funds in Germany without requiring a branch in the relevant market. For many institutions, such as private banks and independent asset managers, a German branch is not economically worthwhile and doesn't make sense for the business models of these institutions. Large banks, most of which already have EU subsidiaries, rely less on the exemption.
The reason why Germany and Italy deal differently with banks from third countries is explained by the fact that large financial institutions in Europe are subject to uniform supervision, while smaller institutions fall under national supervision.
Brexit Payback?
Now that the wind has changed in the EU with the departure of the UK, the EU wants to further harmonize its banking supervision. According to industry representatives, the planned tightening is actually directed at the United Kingdom and Switzerland has been drawn into the maelstrom.
How drastic the reform will ultimately turn out depends on talks between the EU institutions in the coming months. The next set date is November 8, when EU economic ministers will meet for the first time to consider the EU Commission's proposal.
The entire regulatory package, which includes the controversial decision about branches, is expected to be decided by the end of 2025, according to the EU.
Tug of War
According to the Swiss Bankers Association (SBA), it is not yet clear which side will ultimately gain the upper hand. The industry association told finews.com that opinions are still being formed within the union.
The legislative proposal, which dates back to October 2021, is currently in the legislative process. In the process, the European Parliament and the Council of the EU can amend individual provisions, as they must agree on a common wording.
The SBA is convinced that granting cross-border market access to the EU contributes to open and integrated markets and is therefore in the interest of EU investors and the EU as a whole.
