It spells the end of a certain type of governance in Europe, and confirms the primacy of national issues over the historically inspired integration sought by the founders of the European Community. The referendum result will add the UK to the list of neighbouring countries for which a viable economic arrangement with Europe is vital. Does that represent an opportunity or a threat for Switzerland, which has always belonged to that group of nations?
From the economic point of view, Brexit suggests increased competition between Europe's various financial centres. Since the referendum result, Frankfurt, Paris and Dublin have been promoting what they have to offer to institutions forced to leave London to maintain their unconstrained access to European markets. Switzerland is not a natural candidate to attract that business, since it does not have guaranteed access to the markets concerned.
However, Switzerland could be well positioned as a safe haven in what is an increasingly unpredictable and turbulent environment. Its political stability and solid financial system have got it through recent crises, particularly the period since 2008. Switzerland's resilience, along with its established and credible regulatory framework, means that it can enter this new phase of uncertainty with greater confidence than most neighbouring countries. As regards private banking clients, who are facing another period of great uncertainty, Switzerland should do well, again attracting European money seeking a stable environment and solid banks.
During the Brexit campaign, the debate focused on migration, and the issue received a huge amount of media coverage. However, the referendum also highlighted the desire of a large country to shake off certain rules and obligations: it was a vote against bureaucracy, overly complex European regulations and the relinquishment of sovereignty. The concerns expressed by UK voters were therefore ones with which Switzerland is very familiar: those regarding relations with the European Union. The UK government will now seek to impose on the EU a model for their future relationship that does not involve giving up the UK's economic and political independence. As a result, the UK and Switzerland could jointly propose and develop the model for future co-operation with the EU that Switzerland is struggling to achieve by itself.
It also remains to be seen whether the UK's future deal with Europe in terms of market access and reciprocity can become a benchmark for other countries close to the EU.
If the UK negotiates an agreement that finally defines arrangements under which non-EU financial institutions can access the European market, Switzerland could benefit by applying the same model. In that debate, London and Bern should be allies.
Brexit could therefore be good for Switzerland, enabling it to put in place a viable model that increases its long-term appeal and safeguards its banks' development potential in Europe. On a medium-term view, however, it is fair to ask whether new competition could arise between the UK and Switzerland, since the two countries could have the same status. The first measures mentioned by the UK's Chancellor of the Exchequer on 1 July, even before the withdrawal process had begun, show that the UK intends to compete with Switzerland, particularly as regards corporate taxation. In addition, London is already one of the world's largest centres for private banking and asset management, and so we can expect it to compete harder to attract international savings flows. Accordingly, although Switzerland must join forces with the UK to define a new type of economic association with the EU, it must also prepare for greater competition in savings management, which is its banking industry's core market. The Swiss financial centre has an advantage here, because it has the edge over London in private banking, whereas London is the leader in investment banking.
Although there is a risk that Brussels will prioritise discussions with the UK over those with Switzerland, Brexit could therefore end up benefiting Switzerland. Switzerland's interests will be fully aligned with the UK's, and the two countries' bargaining power should be increased. Nevertheless, once outside the EU, the UK will become a natural alternative and rival to Switzerland, which will force our institutions and banking services to become more competitive.
In the short term, volumes will suffer as clients seek safety and yield. Risk aversion is set to increase, which is likely to damage the earnings power of banks in Europe, and particularly in Switzerland. Further out, however, we could take advantage of Brexit by completing a crucial transition in our relationship with the EU and laying the foundations for the Swiss banking industry's future development within Europe. At the same time, there is a risk that the tone between the UK and EU will harden and that relations will become more strained, which could indirectly drag Switzerland into a downward spiral. Let us hope that the positive scenario wins out.
CEO Private Banking