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Switzerland licks its wounds after the Credit Suisse fiasco and puts all hopes in a sole savior at a time when many other competing financial centers have become very innovative. That is risky, believes finews.asia publisher Claude Baumann.  

You can look at the situation however you want to. But the collapse of Credit Suisse as an independent bank has caused Switzerland’s financial industry, and center, long-term damage. Maybe less so domestically where the surprise and disappointment were large at first. But abroad, things are different. In what are important growth markets for many Swiss banks, clients have simply voted with their feet. They have either already switched to other banks or they are about to.

«The loss in trust by high net worth individuals in the Asian and Middle East markets has made it significantly more difficult to acquire new clients», Christian Hintermann, a banking expert at consultancy KPMG (Switzerland) told finews.tv (German only).

Extensive Disagreement

You can take the statements by the Swiss banking lobby that the financial center has remained intact at face value after the Credit Suisse debacle – but the fact is that this year was one marked by the collective failure of all the country’s relevant institutions.

«The Swiss constellation of policymakers comprises the Ministry of Finance (EFD), the Swiss National Bank (SNB), and the country’s regulator, Finma. All of them lack institutionalized resources and processes to analyze capital market price signals and their implications. That is why they were caught off guard when it came to Credit Suisse’s collapse. Concerted analysis, decision-making, and international cooperation were needed at the time, but the trio of policymakers remained divided.», says Swiss financial expert Beat Wittmann (image below). 

They focused on their individual mandates and failed at important junctures when they needed to work on tasks together and coordinate at critical points. 

Beat Wittmann (Image: BW)

What is even more sobering is the fact that there has been no orchestrated campaign since March to turn the internationally tarnished financial center around. The authorities in Switzerland have failed to provide any kind of counterpoint to the Swiss bashing that has been taking place in key English-speaking media around the world.

Ermotti as Savior

Instead, they seem to have blind faith in Sergio Ermotti as a savior who will make everything come good. Although his qualities and competence are indisputable, and he is surely the most international of all Swiss bankers, it is negligent for Switzerland to simply watch from afar.

It is also remarkable that the banking sector wasn’t even an issue during the recent parliamentary elections. «Leading Swiss politicians have generally treated banks at large as private businesses. That conveniently allows them to stay on the sidelines, while distancing themselves from the complexities of a sector they don’t understand or have a particular interest in, particularly as no votes can be had,» Wittmann says succinctly.

 No Holds Barred

This lack of interest is even more surprising given the fact that Switzerland and its financial center run the danger of being overtaken. After the first warning signs became apparent a few years back, it is now increasingly clear that the country is falling by the wayside in a no-holds-barred competition with other centers.

A 2022 Boston Consulting Group study maintained that Hong Kong would soon overtake Switzerland to become the world’s largest offshore financial center. 

Financial centers from London to Paris to Dubai to Singapore are each engaged in coordinated actions to make sure they are doing everything to underscore their attraction, even to heighten it. What do we have in Switzerland? Radio silence. There are no substantial initiatives that target the Swiss financial sector holistically in a global, international fashion.

A Few Fintechs

This past week, the country showed up at the Singapore Fintech Festival (SFF 2023), the world’s largest event of its kind, with a Swiss Pavilion. Besides UBS, the Swiss Exchange SIX, and a few fintechs, there was little else.

There were no government officials, and no Federal Councillor – even though the event drew 65,000 visitors from around the world. 

That stood in stark contrast to the neighboring Dubai International Financial Center (DIFC) stand at the festival. The display practically touched the ceiling of the expo arena. Moreover, it was staffed by numerous experts who personally were on hand to present themselves and the activities of the DFC extremely professionally. If you had wanted to set up any kind of business in the Middle East soon, you would have gotten the advice you needed there.

New Eldorado

That is probably not very surprising to interested visitors. As finews.com recently reported, the number of Swiss financial institutions making their way to the Gulf is growing longer each month. And it is not just the largest that are headed to this new Eldorado of finance.

Singapore President Tharman Shanmugaratnan (Image: SFF)

Another quite noticeable thing was how Singapore sent all of its important ministers to the SFF, including the new President and former Finance Minister Tharman Shanmugaratnan (image above). If their job was to lend Singapore’s financial center enough gravitas, they certainly succeeded.

The financial center’s success is evidenced by the fact that it now takes up to 18 months to process new applications for family offices in the city-state, up from six previously, as the «Financial Times» (paywall) reported Monday. However, it is also important to note that authorities have tightened the evaluation process in recent months since a large money laundering scandal broke in August, something that finews.com has followed closely.

Hong Kong Gets Ready

Something on that scale can only please a city such as Hong Kong. It is been in a tough fight with Singapore for years and it is also doing everything it can to restore its image after the political protests and the pandemic. As part of that, it launched the «Academy for Wealth Legacy» recently to work with family offices.

The initiative is part of an effort to get at least 200 new family offices to move there by 2025. To that end, the government in March presented a row of initiatives that will help it reach its target, including tax rebates, talent promotion drives, and the creation of a networking platform.

A Quick Wink