The fate of the Swiss financial sector

By Andreas Ruhlmann, Premium Client Manager at IG Bank and Philippe Yacoub, Head of Sales at IG Bank Credit Suisse will cut 4000 jobs adding to another 6000 cuts announced last fall. Investors watched the second largest Swiss bank’s stock price drop to an all-time low at the beginning of the month, and this is […]

By Andreas Ruhlmann, Premium Client Manager at IG Bank and Philippe Yacoub, Head of Sales at IG Bank

Credit Suisse will cut 4000 jobs adding to another 6000 cuts announced last fall. Investors watched the second largest Swiss bank’s stock price drop to an all-time low at the beginning of the month, and this is not an isolated case. UBS has been downsizing dramatically in the past years and the whole sector experiences squeezed profitability.

Swiss banks benefitted for decades of an “unfair advantage”, the banking secrecy, making it one of the world’s leading financial center. With the abrupt end of this opportune legislation, the sector is facing several new challenges.

unnamed (2)
Andrew Saks-McLeod with IG Bank CEO Fouad Bajjali in Geneva, Switzerland

The implementation of the automatic exchange of information is increasing operational and regulatory costs. Assets under management of private clients is also directly affected as previously undeclared clients have seen an immediate haircut in their account holdings.

Additionally Swiss banks suffer from the current macro environment. The strong franc is eroding profits as most of the clients come from abroad. The negative interest rate is also pressuring net interest income and margins, which hit new lows in 2015. Considering these many challenges, it is no wonder that over 50 banks disappeared since 2008. Clearly the game has changed, and the whole sector no longer earns what it use to.

Can the “Golden age” be restored?

While the Swiss people are known for their adaptation prowess, things can no longer be like before, simply because the banking secrecy belongs to the past. On the other hand, Switzerland has the foundation for its financial sector to bounce back. Its political and economic stability, good infrastructure and high standard of living will continue to attract assets and talents in the country. It also has a long banking tradition, a strong sense of privacy and still shelters a dominant part of world’s wealth.

Obviously, banks can no longer simply continue business as usual. They will need to invest and innovate, improve their level of service, and, to tap on institutional clientele, they will also need to achieve higher performance.

The authorities will also have their part to play. The Swiss financial council needs to gain the permission to access European markets from Swiss soil as this will be important to preserve jobs and talents in Switzerland. Innovation must also be privileged. The FINMA recently authorized fully online account applications and intends to create a “light” banking licence for Fintech businesses. While lots still needs to be done, it is a first path in this direction.

Although most Swiss banks are now conscious of the need to innovate and to use technology, they have for too long rested on the banking secrecy. Comfortable salaries and bonuses in the sector also dissuaded many bankers to take part in entrepreneurial Fintec ventures. With both being now part of history, will the Swiss financial sector manage to reinvent itself and regain its place as a major financial hub?

Read this next

Retail FX

Malaysia regulator exposes OctaFX clone, shady FB profiles

Malaysia’s financial regulator today warned online investors about the risks of following investment tips made on social-media platforms.

Digital Assets

Crypto trading volume spikes at Swiss bourse amid FTX collapse

The shockwaves from the historic collapse of Sam Bankman-Fried’s crypto empire are still being felt across the industry, but some trading venues are actually doing better because of it.

Executive Moves

CMC Markets adds Camilla Boldracchi to institutional sales

UK’s biggest spread better, CMC Markets has promoted Camilla Boldracchi to take on an expanded role within its institutional sales desk.

Institutional FX

FXSpotStream reports $1.48 trillion in monthly volume for November

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for November 2022, which moved higher on a yearly basis but reflected weak performance across executed trade volumes when weighed against the figures of the prior month.

Retail FX

Interactive Brokers’ client activity drops 30% YoY

Interactive Brokers LLC (NASDAQ:IBKR) saw 1.95 million daily average revenue trades, or DARTS, in November 2022 compared to 1.96 million transactions in the prior month.

Digital Assets

The rise of Crypto ETPs in traditional exchanges as crypto winter deepens

Institutional investors are increasingly looking at traditional regulated exchanges as their first route into digital assets amid market turmoil caused by the crypto winter and the collapse of several big names within the space, including FTX. Acuiti and Eurex surveyed 191 buy and sell-side firms on their views of the digital assets markets in order […]

Digital Assets

TP ICAP’s crypto arm receives FCA’s go-ahead

UK interdealer broker TP ICAP has received a regulatory go-ahead to launch its cryptocurrency services in the UK. The bid shows that the recent collapse of FTX exchange has done little to damp the interest of big names in running their own crypto business.

Industry News

Coin Signals founder to pay $2,847,743 after prison sentence over crypto Ponzi scam

The U. S. District Court for the Southern District of New York has ordered Jeremy Spence, founder of Coin Signals, to pay $2,847,743 in restitution to victims of a fraudulent virtual currency scheme.

Digital Assets

CME Group goes DeFi: Reference rates and real-time indices of Aave, Curve, Synthetix

“These rates are designed to provide traders, institutions and other users transparency and price discovery across a much broader range of tokens, allowing them to confidently and more accurately value cryptocurrency sector specific portfolios and manage price risk around various blockchain-based projects.”