Mr. Chair, Dear Colleagues,
The last few years have shown: The way how financial markets perform their functions is of crucial importance for the well-being of an economy. The financial crisis of 2008 proved the fragility of the financial system and spurred thinking of how the system can be made more robust. For Switzerland it is clear that the issue of financial stability should be addressed on a global scale, following the global focus of banks and financial markets.
While vulnerabilities can easily spread to other markets outside of national borders, the regulatory framework is lagging behind in terms of recognizing these international interrelations and in setting up appropriate institutional frameworks: this holds particularly true for resolution mechanisms. Therefore, Switzerland welcomes the EU-objective to harmonize EU-financial market regulation. However, some of the upcoming regulations create also concerns on the Swiss side.
We appreciate the effort of the EU to strengthen and harmonize investor protection. In Switzerland investor protection always had and will continue to have a high priority. We are currently in the process of further strengthening investor protection in our national regulation - some important steps having already been achieved in the last years - thereby taking into account the developments in the EU. Switzerland is fully committed to implement international standards timely and adequately as well as to prevent regulatory arbitrage.
Measures to strengthen investor protection should however not be more onerous than needed to ensure the protection of investors and the functioning of markets. Switzerland is notably concerned about the current proposals of the EU Commission for a revision of MIFID and MIFIR Markets in Financial Instruments Directive MiFID and the respective Regulation MiFIR.
Let me tell you why we are concerned: The requirement to provide financial services to EU retail and professional clients exclusively through a branch established in the EU would lead to a de facto impediment for the provision of investment services on a cross-border basis.
The aim of the EU to strengthen investor protection can be ac-commodated by pure organizational requirements on a branch such as sufficient staff, organization and capital in the EU. Consequently, the proposed de facto closure of the cross-border business clearly exceeds the aim to strengthen investor protection.
Such closure of EU-markets is not in the interest of integrated, global financial markets.
• It goes against the genuine spirit of free and open market policy.
• It reduces customer choice.
• It prevents competition to the detriment of EU-investors and EU-markets and impairs negatively the liquidity of European markets as third-country investors find it more cumbersome to invest in European financial instruments.
Switzerland is convinced, and I think all European countries would agree, that in the current context we should make our best efforts not only to regulate the financial markets, but also to secure growth and economic development. For all the reasons listed before, such a closure of EU-markets would precisely go against economic development.
Therefore, it should be explicitly clarified in MiFID II / MiFIR that third-country firms should continue to be free to provide financial services actively and directly – meaning cross-border and not through a branch – to retail investors in the EU. The Commission’s proposal of MiFID II and a number of other new EU-regulations require equivalence in the third-country regulatory and/or supervisory framework. We would like to emphasize that equivalence should be assessed on an outcome-based approach. They should not require identical rules and supervisory processes in the third country, but should allow for a holistic assessment which includes regulation and effective supervision as well as enforcement. Finally, third-country regimes including the one of MiFID II should provide for sufficient transitional periods and measures. This will allow for the completion of necessary changes to national law and the taking of decisions on equivalence as well as the conclusion of cooperation agreements in a timely manner.
Mr. Chair, let me summarize in saying that Switzerland supports fully and without restrictions the necessary efforts to harmonize and regulate financial markets, in order to efficiently and effectively protect investors. But Switzerland opposes with the same strength against regulations that exceed this goal, causes protectionism and thus would have negative impact on the European economy as a whole.
Thank you very much for your attention.