Fi­nan­cial mar­ket pol­i­cy: head­ing in the right di­rec­tion

Focus16 November 2017

The SIA appreciates the Brunetti Panel’s report on further development of the financial market strategy and the Federal Council’s report on financial market policy. In its view, there is further need for strategic action with regard to Brexit and to Switzerland’s adaptation to international Standards.

Having been mandated by the Federal Council, the Brunetti Panel presented its report and detailed proposals on the further development of the financial market strategy by the end of 2014. The Swiss Insurance Association SIA noted these proposals with satisfaction. In particular, it found the recommendation to include both market players and academics in the regulation process at an early stage (the so-called participatory approach) to be very promising.

An outcome-oriented regulation cannot rely on a categorical assessment of the need for regulation alone, it also needs analysis and careful evaluation as to its impacts – at the earliest possible stage. Upon implementation, transparent guidelines are needed to make communication with the Financial Market Supervisory Authority as effective as possible.

A “level playing field” with the EU is an essential prerequisite to enhancing market access

In the SIA’s view it makes sense to enhance market access for the providers of financial services in the long term. In order to meet this goal, Switzerland has to be guided by international standards and to take part in international regulatory bodies. In order to access other markets and be competitive on an international level, Swiss financial market regulation and supervision has to be equivalent to those practised in the European Union (EU). The EU has now recognised that the Swiss standards of financial markets regulation and supervision are equivalent to its own. However, there is no real “level playing field” so far.

Many Swiss regulatory provisions are more stringent than their EU counterparts, especially in terms of capital requirements. Swiss insurers therefore are less competitive and, in turn, offer less customer protection – despite the latter being a primary strategic goal of FINMA. In the eyes of the SIA, market access is only conceivable if a level playing field can be guaranteed.

Insurers still systemically irrelevant

Concerning “too big to fail” issues, the report proposes convincing analyses and measures for the banking sector. The systemic importance of the insurance companies received only summary treatment, however, the SIA agrees with its findings: There no systemically important insurers nationwide – and therefore there is no need for action to address risks to financial stability in the insurance sector.

Enlarge and strengthen the institutional dialogue

Bodies that deal with strategic and regulatory issues relating to the further development of the financial market will continue to be needed in the future, thus the SIA. The private insurers therefore welcome the Federal Council's decision to keep the Brunetti Panel in operation as an advisory body fr strategic issues and to upgrade the “Financial Centre Forum” [Forum Finanzplatz]. In future, this form will coordinate the institutional dialogue between authorities, market participants and academics. The Forum will mainly address Swiss and international regulatory issues.

Paving the way for innovation

The Federal Council’s report on “Strategic Directions for Switzerland's Financial Market Policy”, published in October 2016, has also been welcomed by the SIA. The SIA shares the strategic directions as set out in the report, however, not all of them are equally important for the insurance industry. Ensuring, protecting and enhancing market access – especially beyond the European borders – are of primordial importance to the latter, as are optimising regulatory content and processes and paving the ground for innovation. Of course, the emphasis should be on implementing these measures within a reasonable period of time.

Tackling Brexit in tandem with the financial services industry

The UK is an important market for Swiss insurers and other financial market participants. Any legal uncertainties and loopholes affecting Swiss-British relationships and stemming from Brexit must therefore be avoided. The Swiss insurers intend to safeguard at least the following, existing liberties: freedom of establishment in accordance with the Insurance Treaty, EU passport for Swiss reinsurers due to the Equivalence of the Swiss Solvency Test (SST) and Solvency II, guaranteed freedom of movement, at least for insurance specialists. There are three ways to safeguard those liberties:

  • leaving the current EU standard intact as regards the UK and therefore Switzerland, too;

  • concluding a general free trade agreement between Switzerland and the UK;

  • concluding some sort of financial services agreement between Switzerland and the UK.

It is important that the Federal Council implement its “mind-the-gap strategy” in cooperation with the financial services industries.