Singapore has long modeled its financial center on Switzerland’s success. But beyond the superficial similarities, the two countries have pursued dramatically different paths, especially in the financial sector.
Absent of natural resources, both Switzerland and Singapore have tapped finance and offshore banking for their economic growth. The two governments have adopted very different approaches in fostering their financial service industries.
What can Switzerland learn from fledgling, forceful Singapore, and what lessons does the Asian hub hold in store for its Swiss peers?
Different Framework
The Monetary Authority of Singapore, or MAS, is a central bank, financial regulator and industry cheerleader combined. This makes for an efficient and coordinated approach in fostering growth of the financial center, and it also ensures that the authority speaks with one voice.
By contrast, Switzerland’s central bank – the Swiss National Bank (SNB) – is tasked with monetary policy and is guaranteed independence from the government. The task of supervising banks lies with Eidgenoessische Finanzmarktaufsicht (Finma), and a group of 100-odd government staff at State Secretariat for International Financial Matters (SIF) coordinate international financial, monetary and tax matters.
An assortment of industry bodies like the Swiss Banking Association (SBA) or trade groups representing the interests of private banks, asset managers, and other specialized providers rounds out the framework in Switzerland.
A Concentration of Risk
While Singapore’s approach means the city-state can enact forceful changes quickly, some experts consider having so much influence with one body a concentration risk.
Switzerland’s approach fits its liberal, light-touch business tradition of as little interference as possible. But is can also make for embarrassing bumbles, such as after the financial crisis when the central bank and the Finma publicly squabbled over responsibility for policing too-big-to-fail banks.
Attractive And Not so Attractive Jobs
Singapore fosters and handpicks top domestic graduates early on systemically with talent recruitment schemes. Jobs at the MAS, sovereign wealth fund Government of Singapore Investment Corporation (GIC), the Ministry of Finance (MOF), and even the armed forced are considered plum assignments over private sector jobs such as at domestic banks.
In Switzerland, regulatory jobs are no longer considered the career backwater that they once were, but Finma in particular has had trouble attracting and retaining top talent, due in part to not keeping pace with banking industry pay. Regulatory jobs are also generally seen as less attractive than ones with national champions like UBS, which can offer recent graduates attractive development opportunities.
So What Can The Two Learn From Each Other?
Both Switzerland and Singapore have a qualified workforce, but Singapore lacks the type of vocationally-trained skilled worker that Switzerland produces by the thousands annually. Not university-trained, these workers form the backbone of Switzerland’s banking industry.
Singapore, far younger than Switzerland as a financial center, has thus far struggled to bring forth a national publicly-listed champion like food and beverage giant Nestle, Swiss bank UBS, or drugmakers Novartis and Roche. Singapore Airlines is a respected industry leader, but majority-owned by Temasek Holding.
By contrast, Switzerland’s fragmented approach to regulation, supervision, monetary authority and promoting itself as a center of business means it is less efficient at attracting new business than its smaller rivals. Singapore, by contrast, has a conceived an office tasked with promoting inward investments, the Economic Development Board.
More Different Than Alike
The varying approaches from the two financial centers mirrors the fundamental differences in their democracies. While Singapore is ruled strictly top-down, Switzerland cherishes its direct democracy, where citizens vote on everything from testing for genetic defects in IVF embryos to a guaranteed income for all.
To be sure, one size does not – and need not -- fit all. Both money centers have taken prevailing conditions and used them to their best advantage in fostering a marketplace for financial providers to flourish.
