Switzerland as a globally oriented financial centre

The Zurich stock exchange
The Zurich stock exchange © FDFA, Presence Switzerland

Switzerland is one of the world's leading financial centres. The Swiss financial industry significantly contributes to Switzerland's economic performance and is strongly intertwined with other countries. In this context, access to the EU financial market is of particular importance for Swiss financial service providers.

The financial crisis triggered - among other things - a number of regulatory projects in the EU aiming to strengthen financial markets, improving transparency and enhancing harmonisation of the internal market. These included the creation of a market access regime for third countries like Switzerland in certain areas, harmonising the previously-fragmented national rules on market access. Such third-country regulations or market access regimes are important for Switzerland, given that no bilateral agreement between the EU and Switzerland has been concluded in the financial market sector that would otherwise regulate market access. Only in the insurance sector has there been an agreement between the EU and Switzerland since 1989. It allows non-life insurance companies to establish and operate branches in a country of the other contracting party.

Third-country provisions in EU law foresee different conditions for market access depending on sectors. These market access rules include in particular the following elements:

  • Equivalence between the Swiss and EU regulations in the concerned sector;

  • Equivalence for the supervisory duties of the monitoring authorities (implementation of the supervisory law);

  • A cooperation agreement between the interested monitoring authorities (of the Member States and the EU) and the surveillance authorities of the third country.

Other general conditions apply to combat money laundering and to increase the cooperation in fiscal matters. In some cases, rules on market access affect Swiss undertakings, such as the obligation to establish a subsidiary branch in the EU.

Another challenge with regard to the equivalence process is the increasing politicisation of the process by the European Commission. Based on the outcome of the negotiations of the Institutional Framework Agreement, the Commission granted Switzerland the stock market equivalence only for a limited period of time. At the end of June 2019, the EU decided that Switzerland’s stock market equivalence would not be extended due to insufficient progress in the institutional negotiations. In this context, the Federal Council adopted a measure to protect the Swiss stock exchange infrastructure that entered into force on 1 July 2019 and was in turn transposed into ordinary law on 1 January 2024. However, the measure remains extraordinary even after the transfer and is initially valid for five years. Moreover, the Federal Council can deactivate this measure vis-à-vis the EU even before this period expires.

Switzerland has also taken regulatory measures in response to the financial crisis. Important legislative changes were implemented, such as the Basel III framework, the regulation mitigating the issue of “too big to fail”, the regulation of financial market infrastructures (stock exchanges, central counterparties, central securities depositories) and the trading of derivatives. Further parts of the new regulatory financial market architecture - the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) - came into force on 1 January 2020.  The FinSA contains code of conduct provisions with which financial service providers must comply vis-à-vis their clients. The FinIA essentially harmonises the licensing regulations for financial service providers.

Innovation and sustainability are key factors for a competitive financial sector in Switzerland. The Federal Council is open to the opportunities that technological advancements, digitalisation and sustainable finance offers by creating an appropriate legal framework for the country to establish itself as an innovative and sustainable financial center. In this regard, different regulatory adjustments have already been made. As such, Switzerland was one of the first countries in the world to have legal regulations for blockchain technology and its use in the financial sector. The Swiss financial centre is also set to further solidify its position as one of the world's leading locations for sustainable finance through an optimal regulatory framework, which includes strengthening transparency on environmental risks and impacts and avoiding greenwashing. The EU is also actively working on measures in digital finance and sustainable finance.