Addressing present challenges: a case study

In this step, we return to our first keyword, namely that of money. However, this time our focus is neither on corporate taxation nor on banking secrecy. Rather, we turn to a new and particularly demanding issue, namely that of financial services. With this, we mean the activities notably of banks and insurance businesses. We will use this example in order to discuss the challenges that pose themselves in view of the conclusion of new Swiss-EU Agreements in a situation where everything is more complicated than it used to be. We stated earlier in our course that there is, at present, no specific Swiss-EU Agreement in the field of financial services.

You will remember that the Insurance Agreement of 1989 does not cover services but is rather about the establishment of insurance companies. As for the Agreement on the free movement of persons, we heard that it covers services, though only to a limited extent. Notably, the agreement contains a special rule on financial services for which prior authorization is required and which are subject to so-called prudential supervision, that is state supervision. According to Art. 22(3)(ii) of Annex 1 to the Agreement, the rights of such service providers are under the reservation of the applicability of the laws, regulations, and administrative provisions prevailing in all contracting parties at the time of this agreement’s entry into force.

In other words, there is room for national laws that limit the access to the financial services market for foreign economic actors. We must therefore conclude that so far there is no comprehensive Swiss-EU regime that would allow for an easy economic exchange in this particular field. In addition, the financial sector today is so complex that it is generally agreed that special regulation is required. A general rule such as the prohibition of discrimination on grounds of nationality is not enough. What, then, does the financial sector itself wish? Well, it is interesting to note that attitudes in Switzerland have changed over time.

First, for quite some time, it seemed that only the insurance sector was interested in a new agreement and not also the banking sector. More recently, the interest seems less on the side of insurance, whilst the banking sector appears to be cautiously in favour. On its website, the Swiss Banking Association writes under the title of EU Market Access, access to foreign markets is of strategic importance for ensuring the Swiss financial centre’s ability to remain competitive. ‘The preservation of a significant portion of added value and jobs in Switzerland also depends on the future success of the banks in Switzerland in asserting their position as one of the leading global financial centres.

Autonomous action alone will not bring about the desired results for protecting market access. In order to gain market access, political agreement must also be reached with the various partner states. Different measures should be taken simultaneously to this end, as a number of goals are likely attainable in the shorter term, while others will require more time.’ The Swiss Banking Association then states that its goal is to secure non-discriminatory market access to, among others, the EU EEA market. In November 2015, the Swiss Federal Administration reported that initial exploratory talks with the European Commission on the possibility of a future financial services agreement had taken place. However, these are no more than informal first steps.

Whether or not there is a real interest in such an agreement on both sides depends on many factors, among which not least the EU’s unilateral rules on the position of companies of third countries on the internal market. The easier they make it for such companies, the less an agreement is needed. Conversely, where the EU rules are very strict, market access can be guaranteed only through an agreement. In any event, it needs to be remembered that the EU is willing to conclude new market access agreements only once a new regime for the institutional issues is in place. We will discuss in a subsequent step what precisely are the technical challenges of such an agreement.