There’s something about Switzerland
23 Jan 2019
As it has for centuries, Switzerland remains an essential hub for international banking. But now, its asset servicing and technology offerings make it a financial leader of the world
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Switzerland boasts a strong financial industry. Like many other financial hubs across the world, it remains conscious of cost pressures but, at the same time, is extremely capable of keeping up with the latest technology.
As Marc Briol, CEO of Pictet Asset Services (PAS), states: “Switzerland has a long-standing banking tradition. The country boasts a highly-developed and well-regulated financial market.”
Briol adds: “The custody industry, and to a larger extent, the whole financial sector has been transformed by the development of digital. Fast access to accurate data is now seen as a competitive advantage. Investment managers need, and expect, a consolidated overview of a large amount of data, without any loss of information.”
Wim Van Ooijen, country head Switzerland at Northern Trust, explains that there is an “ongoing desire” for further efficiency in the “cost-conscious” Swiss custody market.
Van Ooijen suggests: “The custody market is evolving rapidly. New technologies and solutions such as distributed ledger technology enabling blockchain is a good example of this.”
Another financial trend growing in Switzerland is the broader need for transparency, from both a cost and investment reporting perspective, according to Briol. While another consideration is the need for environmental, social and governance (ESG) awareness.
Briol reveals that one of Pictet’s key focus areas for this year will be the release of ESG reporting to its institutional clients.
Pensions
As aforementioned, Switzerland is also using the advancements of technology across its fund structures, including for pension funds.
Briol suggests that there is a growing demand for “hybrid solution such as fund structures, combined with global custody solutions for pension funds or setups for asset managers that are managing both high-net-worth individuals portfolios and mutual funds”.
He adds: “The whole industry will go through more difficult times and we must at Pictet make sure that our pension funds and asset managers can fully focus on their core business while we handle the main asset servicing related challenges ahead.”
“Given the sophisticated pension fund landscape in Switzerland, clients are rightly so extremely demanding and sharp in their expectations concerning reactivity, asset servicing expertise, analytics and IT solutions.”
Technology
The industry has experienced a global technology revamp in recent years with the introduction of new technologies and products, however, Pascal Thorens, managing director, Switzerland, global client coverage, RBC Investor & Treasury Services, explains that Switzerland is considered to be “a world leader regarding blockchain technology, with global players located in Zurich and Zug”.
Van Ooijen suggests that this is down to the “very high quality and knowledge of industry professionals and asset servicing talent”.
However, he explains that further professionalising the entire value chain of investments and utilising the full possibilities of modern and new technologies is a generic challenge which Switzerland faces.
He adds: “Asset servicing, in general, is a highly technological driven business requiring continuous investment to stay in line with clients, regulatory and broader infrastructural requirements. The possibilities new technological advancements are bringing are really exciting.”
“At Northern Trust, we understand our clients continue to face pressures that impact their business models which offer both challenges and opportunities in Switzerland. The winning providers will be those that can sufficiently focus on asset servicing as a real priority in light of these increasing demands and have the required and appropriately suitable, scalable and flexible technology infrastructure to support it.”
Valerio Roncone, head of product management and development of SIX Group, says that Switzerland’s outstanding competitiveness is down to “the innovation strength of the domestic and foreign companies domiciled there, which invest heavily in research and development to supply leading-edge technology for world markets”.
He continues: “This success also stems from a series of economically beneficial factors and attractive operating conditions that help to persuade a large number of international companies to relocate to Switzerland. Switzerland is now one of the highest-performance financial centres in the world. We want this situation to continue.”
SIX announced in July last year that it is building SIX Digital Exchange, a fully integrated trading, settlement and custody infrastructure for digital assets.
Roncone states: “SIX Digital Exchange will be the first market infrastructure in the world to offer a fully integrated end-to-end trading, settlement and custody service for digital assets.”
He adds: “The service will provide a safe environment for issuing and trading digital assets, and enable the tokenisation of existing securities and non-bankable assets to make previously untradeable assets tradeable.”
Brexit
The ongoing uncertainty around the UK leaving the European Union has positioned Brexit as a top systemic risk concern for this year, according to a survey, published by The Depository Trust & Clearing Corporation published late 2018.
Close to half of the survey’s respondents (49 percent) cited concerns around the significant risks attributed to Brexit as one of the top five risks for the industry in the coming year, as the March 2019 Brexit date quickly approaches. However, Switzerland is not a member state and is not part of the EU, so to what extent will it be affected, if at all? Briol explains that Brexit is not a major worry for Switzerland. He said: “From a Swiss perspective, we are not really concerned as Switzerland is not part of the EU. We also believe that bilateral solutions with the UK will be set up to handle the issue.”
A question of equivalence
Switzerland was held with bated breath before Christmas, as time was running out for Swiss equivalence. The one-year period previously granted in December 2017 was set to expire on 31 December.
Anne Plested of Fidessa explained its importance to the country in a blog released on 3 December 2018, in which she affirmed: “Switzerland needs equivalent third-country status in order to preserve the status quo and allow EU trading participants bound by the second Markets in Financial Instruments Directive to continue accessing the Swiss market locally in the EU. The Swiss government’s Federal Council continues to believe that all the conditions, assessed as recently as [2017], are still met for recognition by the EU. They have been holding out for a timely extension, but as yet despite this faith, no equivalence of Swiss stock market regulation has been granted nor promised.”
The agreement has now been extended to June 2019, but Swiss banking associations continue to fight for an indefinite recognition.
As Marc Briol, CEO of Pictet Asset Services (PAS), states: “Switzerland has a long-standing banking tradition. The country boasts a highly-developed and well-regulated financial market.”
Briol adds: “The custody industry, and to a larger extent, the whole financial sector has been transformed by the development of digital. Fast access to accurate data is now seen as a competitive advantage. Investment managers need, and expect, a consolidated overview of a large amount of data, without any loss of information.”
Wim Van Ooijen, country head Switzerland at Northern Trust, explains that there is an “ongoing desire” for further efficiency in the “cost-conscious” Swiss custody market.
Van Ooijen suggests: “The custody market is evolving rapidly. New technologies and solutions such as distributed ledger technology enabling blockchain is a good example of this.”
Another financial trend growing in Switzerland is the broader need for transparency, from both a cost and investment reporting perspective, according to Briol. While another consideration is the need for environmental, social and governance (ESG) awareness.
Briol reveals that one of Pictet’s key focus areas for this year will be the release of ESG reporting to its institutional clients.
Pensions
As aforementioned, Switzerland is also using the advancements of technology across its fund structures, including for pension funds.
Briol suggests that there is a growing demand for “hybrid solution such as fund structures, combined with global custody solutions for pension funds or setups for asset managers that are managing both high-net-worth individuals portfolios and mutual funds”.
He adds: “The whole industry will go through more difficult times and we must at Pictet make sure that our pension funds and asset managers can fully focus on their core business while we handle the main asset servicing related challenges ahead.”
“Given the sophisticated pension fund landscape in Switzerland, clients are rightly so extremely demanding and sharp in their expectations concerning reactivity, asset servicing expertise, analytics and IT solutions.”
Technology
The industry has experienced a global technology revamp in recent years with the introduction of new technologies and products, however, Pascal Thorens, managing director, Switzerland, global client coverage, RBC Investor & Treasury Services, explains that Switzerland is considered to be “a world leader regarding blockchain technology, with global players located in Zurich and Zug”.
Van Ooijen suggests that this is down to the “very high quality and knowledge of industry professionals and asset servicing talent”.
However, he explains that further professionalising the entire value chain of investments and utilising the full possibilities of modern and new technologies is a generic challenge which Switzerland faces.
He adds: “Asset servicing, in general, is a highly technological driven business requiring continuous investment to stay in line with clients, regulatory and broader infrastructural requirements. The possibilities new technological advancements are bringing are really exciting.”
“At Northern Trust, we understand our clients continue to face pressures that impact their business models which offer both challenges and opportunities in Switzerland. The winning providers will be those that can sufficiently focus on asset servicing as a real priority in light of these increasing demands and have the required and appropriately suitable, scalable and flexible technology infrastructure to support it.”
Valerio Roncone, head of product management and development of SIX Group, says that Switzerland’s outstanding competitiveness is down to “the innovation strength of the domestic and foreign companies domiciled there, which invest heavily in research and development to supply leading-edge technology for world markets”.
He continues: “This success also stems from a series of economically beneficial factors and attractive operating conditions that help to persuade a large number of international companies to relocate to Switzerland. Switzerland is now one of the highest-performance financial centres in the world. We want this situation to continue.”
SIX announced in July last year that it is building SIX Digital Exchange, a fully integrated trading, settlement and custody infrastructure for digital assets.
Roncone states: “SIX Digital Exchange will be the first market infrastructure in the world to offer a fully integrated end-to-end trading, settlement and custody service for digital assets.”
He adds: “The service will provide a safe environment for issuing and trading digital assets, and enable the tokenisation of existing securities and non-bankable assets to make previously untradeable assets tradeable.”
Brexit
The ongoing uncertainty around the UK leaving the European Union has positioned Brexit as a top systemic risk concern for this year, according to a survey, published by The Depository Trust & Clearing Corporation published late 2018.
Close to half of the survey’s respondents (49 percent) cited concerns around the significant risks attributed to Brexit as one of the top five risks for the industry in the coming year, as the March 2019 Brexit date quickly approaches. However, Switzerland is not a member state and is not part of the EU, so to what extent will it be affected, if at all? Briol explains that Brexit is not a major worry for Switzerland. He said: “From a Swiss perspective, we are not really concerned as Switzerland is not part of the EU. We also believe that bilateral solutions with the UK will be set up to handle the issue.”
A question of equivalence
Switzerland was held with bated breath before Christmas, as time was running out for Swiss equivalence. The one-year period previously granted in December 2017 was set to expire on 31 December.
Anne Plested of Fidessa explained its importance to the country in a blog released on 3 December 2018, in which she affirmed: “Switzerland needs equivalent third-country status in order to preserve the status quo and allow EU trading participants bound by the second Markets in Financial Instruments Directive to continue accessing the Swiss market locally in the EU. The Swiss government’s Federal Council continues to believe that all the conditions, assessed as recently as [2017], are still met for recognition by the EU. They have been holding out for a timely extension, but as yet despite this faith, no equivalence of Swiss stock market regulation has been granted nor promised.”
The agreement has now been extended to June 2019, but Swiss banking associations continue to fight for an indefinite recognition.
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