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EU negotiators agree on financial trading rules

UBS is one Swiss bank with branches all over the world, such as in Frankfurt, Germany, above. But smaller banks lack the resources to open new EU branches Keystone

The European Union has agreed on its new MiFID II financial trading laws, and it’s good news for Swiss banks: non-EU institutions will not face equivalency laws when dealing with private customers and will still be able to work with EU countries bilaterally.

This content was published on January 16, 2014 - 12:49
swissinfo.ch and agencies

One proposal on the table could have forced non-EU banks to open branches in EU countries where they want to do business; another could have mandated that foreign countries’ financial services laws be proven sufficiently equivalent to those in the 28-member bloc if they wanted to work with private clients in the EU.

Neither option was ideal for Swiss banks, which feared discrimination in cross-border business with private clients, job losses and an outflow of client assets if the proposed mandates were put in place.

Ultimately, neither sweeping proposal was chosen, although individual EU countries could still choose to mandate that outside countries open branches on their soil to do business there. In addition, financial equivalency laws will be implemented for banks dealing with business customers, through the introduction of an " EU passport" contingent on banks from non-EU countries passing an equivalency test.

However, since most Swiss banks focus on the retail business, the changes will not have far-reaching consequences, especially since those banks that serve business customers already have branches in other EU countries.

Banking sector responds

The decision by negotiators from the EU’s member states and its parliament was welcomed by the Swiss banking sector on Wednesday.

“Overall a satisfactory result,” the Swiss Bankers Association expressed via Twitter.

External Content

And, the State Secretariat for International Financial Matters was “cautiously optimistic” about the decision by EU negotiators.

“As a result, customer and investor protection in the EU is likely to be improved without a foreclosure of the cross-border wealth management business from Switzerland," said spokesman Mario Tuor.

On Thursday, the Swiss Private Bankers Association said the decision was not as bad as they had feared, though “the situation was still far from satisfactory”.

The Association’s president, Christoph B. Gloor, said the current regulations on market access among EU member states are still too different however: “We wouldn’t, for example, be able to advise a French client over the phone”. He added that the customer would have to travel to Switzerland for every meeting.

The MiFID II revision is intended to apply lessons learned from the global financial crisis to EU laws, particularly increasing transparency in the way retail investors advise their clients.

It updated the 2007 MiFID I regulations to keep pace with new developments in the financial markets, such as high speed trading and ‘dark pools’ where trade can be conducted without revealing details of prices and volumes.

Although a major hurdle was cleared with Wednesday’s compromise, MiFID II is not yet definitely in the bag, as certain technical details must be clarified and the agreement must have the consent of the European Parliament and the member states in the EU Council.

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