Bankers warn of too much red tape

Christian Rahn warned Switzerland could not soon introduce a withholding tax on EU citizens' savings Keystone Archive

Swiss private bankers have complained about an “endless avalanche” of rules and regulations governing Switzerland as a financial centre.

This content was published on January 17, 2004 - 11:58

They argue that these regulations are costly and do not necessarily have the desired effect.

At its annual media briefing in Bern on Thursday, the Swiss Private Bankers Association warned against imposing controls on all areas.

Highlighting the problem, Konrad Hummler, a managing partner with Wegelin & Co. in St Gallen, cited the revision of the law on stock exchanges and the total revision of the law governing investment funds.

“The problem is actually the sheer quantity of what’s happening. We are faced with about 20 new regulations of quite some importance this year,” Hummler told swissinfo.

“New controls”

“We have been forced to have new controls and new internal regulations in our banks in the past few years, so I have the feeling that it’s a quantitative problem.

“On the other hand it’s also a qualitative problem because quantity doesn’t make the world a safer place,” he added.

Hummler complained that the plethora of regulations was sometimes counter-productive.

“There’s a lot of redundancy of laws and any kind of external law has to be reflected by an internal regulation. I have the feeling that by doing more, we sometimes have less control,” he said.

In an investment letter last December, Hummler said it was understandable that after a financial crisis or human catastrophe there were desires and even demands that everything be done to prevent similar events occurring again.

Prevention

But he argued that the desire to prevent recurrences was not necessarily justified because prevention presupposed that the causes of the crisis or catastrophe were known.

And he observed that despite all the talk about corporate governance and controls over the past few years, the Enron corporation had collapsed and a financial black hole had been found at Italy’s Parmalat.

“There was regulation but the very huge cases cannot be avoided obviously,” he said.

The costs to the banks of the increasing number of controls has not yet been quantified but is the subject of a study to be published in about six months time.

Costly regulation

“It’s difficult to quantify in franc or dollar terms but I usually use about 30 per cent of my time for regulatory questions. There’s not a lot of added value behind that obviously,” Hummler told swissinfo.

The Swiss Private Bankers Association also said on Thursday that it would be an “illusion” to believe that Switzerland could introduce a withholding tax on savings’ income for European Union clients with Swiss bank accounts from next January.

Christian Rahn, a partner with Rahn & Bodmer in Zurich, said that the EU was slow to take political decisions at a time when an “enormous technical” work had to be completed by the authorities and all other concerned parties.

swissinfo, Robert Brookes

banking

The private bankers represent the oldest form of Swiss banking.
They are usually specialists in asset management.
The Swiss Private Bankers Association has 13 members.
Founded in 1741, Wegelin & Co. of St Gallen is Switzerland’s oldest bank.
The association defines a private banker as “a businessman in the private banking sector, using his own capital to conduct his business, conscious of his unlimited liability and his power to take independent decisions”.

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banking

Private bankers say they are facing an ever-increasing number of rules and regulations.

The bankers say that these regulations are not necessarily effective.

They feel that it is not realistic to expect Switzerland to introduce a system of withholding tax on EU citizens’ savings income from next January.

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