Although a break-up of the eurozone was regarded by some as inevitable after last year's Brexit vote, that is no longer a real threat. On the contrary, recent elections in the Netherlands and particularly France – where Emmanuel Macron has from the outset been in favour of a stronger, united Europe – seem to have breathed new life into the European project. For the UK – which has been plunged into uncertainty by last week's parliamentary election – and by implication for Switzerland as well, the opportunities for bilateral talks that could have arisen from a break-up scenario will therefore no longer arise.
Eventually, Europe's new impetus could lead to stronger European governance and solidarity against the UK, but also Switzerland, when talks take place on future political and trade relationships. As a result, the prospect of banks established in Switzerland gaining access to the European market seems to be receding by the day, especially since discussions with Bern now appear to be lower on Brussels' to-do list. Rather than maintaining false hopes, Swiss banks are now taking a pragmatic approach.
European operational hubs
Banks are implementing several business models depending on their size and European strategy. The largest banks have opted to set up European operational hubs. They are located in Germany or Luxembourg and are intended to manage all the banks' European subsidiaries outside Switzerland. The main aim of these hubs is to take an "industrial" approach to optimising operations, and have no direct connection with EU talks.
Other banks have less ambitious plans, setting up European subsidiaries to develop branches that have strictly commercial operations. The aim is to benefit from European passporting through small units that have local competencies, with centralised booking generally based in Luxembourg.
Lastly, banks that do not have critical mass are taking a more conservative approach. Rather than developing European franchises they are promoting their booking capabilities in Switzerland, Monaco or London, offering clients a way of diversifying geopolitical and currency risk when managing their assets.
Europe more difficult than Asia
Whatever the approach adopted, the issue that all Swiss banks face is to remain competitive in a foreign market. For a bank to achieve penetration in a market other than its domestic market, it needs to develop financial products and services that suit specific local features and tax environments, and must have a firm grip on capital adequacy and tax reporting obligations. Having a "local" bank is helpful in meeting those requirements.