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Bankers say "no" to more regulation

Bankers say they do not want more state controls


Swiss bankers reject strengthening internal surveillance and controls of financial institutions foreseen by the Federal Banking Commission.

The Swiss Bankers Association, the umbrella organisation of Switzerland’s banks, says it prefers "made-to-measure" solutions and not blanket state regulation.

A Bankers Association statement on Wednesday was in response to a draft circular which the commission sent out for consultation in May.

Spokesman Thomas Sutter told swissinfo that, although the association, in principle, supported the goals of the circular and considered the contents to be partly correct, there was no need for additional regulation.

"We feel that most of the areas [covered] are already regulated either by law or by our self-regulation. Therefore we don’t think it’s necessary to have a special circular on surveillance and control," he commented.

Whistle blowing

Among the most controversial of the issues rejected by bankers is the commission’s idea to introduce a system whereby bank employees could announce irregularities directly to the board of directors rather than their immediate superiors.

The association said it rejected this new "whistle blowing" clause because it would "radically change" the internal culture of banks as well as the atmosphere in the workplace.

"We feel that in the context of a good working environment, you should be able to talk directly to your superior and tell them if there is a problem. We actually encourage banks to have this [kind of system] in place," said Sutter.

"The Federal Banking Commission explains that the whistle-blowing clause is also good for risk management but we feel there are other tools in place in banks that already promote good risk management," he added.

The association also criticised planned regulations on the composition and independence of boards of directors.

Cost benefit

It added that the draft circular did not differentiate enough in its scope and it would not survive a cost-benefit analysis if tested on individual cases.

Tanja Kocher, spokeswoman at the banking commission in Bern, said that a report from an expert committee in 2000 had shown that more state controls were needed.

"The Federal Banking Commission is now trying to put this into practice. It has just taken a long time," she told swissinfo.

Kocher added that the bankers’ response was just one of many.

"We will now wait for the other reactions before deciding on the next steps."

Asked whether the commission had expected the bankers’ rejection of the draft circular, Kocher was diplomatic.

"When the Federal Banking Commission is convinced about a [new regulating] instrument, it does all it can to push it through. But when it sends out a draft of a new regulation for consultation, it means that the commission is also prepared to negotiate."

swissinfo with agencies

Key facts

The Federal Banking Commission’s "Internal Surveillance and Control" circular, issued in May, emphasises the commission’s expectation that Swiss banks should be at the forefront of corporate governance.
The commission’s says its letter also offers reasonable scope for differentiation. Depending on the size and complexity of the supervised firm, it foresees various forms of exemption and relief.
It regulates and elaborates on, among other things, the board of directors' independence, the audit committee function, internal audit's duties, the compliance function and whistle blowing procedures.

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