Swiss Banking at a Crossroads
The financial cities don’t currently have the feel they used to have and questions about advantages of individual financial markets become all the more pressing. There are reasons though why Swiss banking isn’t for the scrapyard yet.
The reports from across the globe are all fairly identical: things aren’t how they used to be. Manhattan, the heart of the global financial market and home to Wall Street, is akin a ghost town, said James Altucher, a known blogger, in a much-read entry.
Many financial market professionals won’t ever return to their desks. Instead, they will work from home, which may be as far away as Arizona and communicate with colleagues via Zoom-calls.
Empty City, Empty Geneva
Reports from the City of London, Europe’s dominant financial market, are pretty similar. Employers are busy honing their concept papers for permanent home office, according to a report by the «Financial Times» (behind paywall). The newspaper of the financial elite frets of a city whose elegant shops, posh clubs, restaurants and busy cultural centers had to close down because its clients are gone.
Geneva is harboring similar concerns, with both big private banks, Pictet and Lombard Odier, planning to leave the city center permanently. In Zurich, Credit Suisse only yesterday published its plans to launch a digital bank, which will help it save on rent it now pays for posh inner-city offices.
No Banking Center, No Industry Policy
If there are no office, branches or staff, banking will change though. Promoting a financial market that has no physical existence is a very hard task – in Switzerland, only the well-known bank palaces on Paradeplatz and at Place de la Corraterie will remind of the grand bank’s dominance.
Of course, there is Swissness. The Swiss financial market is renowned for stability, quality and discretion. It attracts the most offshore money, while London has the capital market lead for Europe and Wall Street is home to the leading investment banks. Hong Kong and Singapore meanwhile are the trading hubs of an emerging Asian region.
Given a Choice Between Gafa and Alibaba
But digitization, which has received a major boost by the pandemic, will lead to the watering down of traits that have grown over time. Financial eco-systems won’t respect borders and the all-too-dominant tech industry is increasingly bipolar.
Google, Apple, Facebook and Amazon in one corner and Alibaba, Ping An and Huawei in the other – the U.S. pitched against the Chinese.
Banks will probably have to decide which of the two they will align with. Even if it isn’t a great prospect to be either a Google- or an Alibaba-satellite.
What Is the Raison d’Être?
The Swiss financial market has to reevaluate the reasons for its existence. Their thoughts need to go beyond the short-term cost and revenue targets. This process is something that boards of directors and bank bosses should see as their key tasks.
finews.com suggests three ideas for what’s at stake and what is possible – in keeping with what some experts voiced at a meeting of banking experts in Bern on Tuesday.
1. Constructing a Digital Fortress
It is worth your while looking at developments from another perspective, considering the situation of the financial market not only from the point of view of its key components. The Gafa firms, which seem to be behind all the current progress, in some respects have similar needs as have banks – both tech and banking are selling a product based on security and trust.
A trusted counterparty is as valuable to the tech firm as is a secure banking relationship in finance, Sita Mazumder said at the expert round. The initial failure of Facebook’s Libra is no accident, because it lacked the key ingredient, which is trust.
The Swiss financial market has both – solid financial-services firms and a growing cluster of high-security storage facilities and cyber-protection expertise.
If these strengths are combined with aplomb, Swiss banking could turn itself into a fortress for financial data.
2. Learning From China
A fortress that could offer protection from spying by countries including China. At the same time, the industry would do well to learn from China’s tech industry. Adrian Honegger, a nuclear scientist and strategist at Swiss insurer Baloise, referred to the corporate structures of Alibaba and its competitors.
They tend to group the services around a platform core. The services added to this core include payment apps like Alipay which then provides access to hundreds of growth markets.
The Swiss financial industry ought to turn itself into this layer of services much like in the Chinese example, said Honegger. If you control the interface between platform and market, you become indispensable to other market participants.
3. Moving the Banker Into the Focus
A baker is baking, a programmer is programming, an engineer is designing – and they all are proud of their business. When I ask colleagues at the bank about the meaning of their job, they have to think long and hard, said Andri Silberschmidt, ex-banker and politician at the talk in Bern.
A troubling thought, because the industry risks losing the biggest talents. Knowing what your business is all about is key for a banker though, because nobody is better placed to own and represent the interface to the client.
The human being has to take center stage in banking and relationship managers ought to get access to the best tech tools available. It would help them serve their clients in the best possible way.
Human Beings as Mere Cost Factors
The trend however is pointing in the opposite direction as was again apparent when Credit Suisse made its presentation yesterday. Switzerland’s second-largest bank will cut as many as 500 jobs in Switzerland, and other banks will probably follow its lead soon.
The human being is a mere cost factor in this strategic choice of banks. It will make it all the more difficult to stop Swiss banking from turning into a shadow of its former self.