It is not up-and-coming financial centers such as Hong Kong, Singapore or Dubai that are making life difficult for Swiss banks. The biggest threat to them comes from domestic politics.
People are rubbing their eyes in amazement. The call for a wage cap for banks was not made by the left, which has long had a hard time with the domestic financial center, but by the SVP.
The SVP is the same party that has always abhorred state interference in the private sector and whose party manifesto states that companies can only be successful if they have as much freedom as possible.
It Should Be About Justice
It is precisely this freedom, which the banks enjoy when setting salaries, among other things, that is now to be curtailed. Last Monday, the Council of States voted 21 to 19 in favor of a motion to limit remuneration to a maximum of 5 million Swiss francs ($5.7 million) per employee.
The initiative was submitted by Jakob Stark, SVP member of the Council of States from the canton of Thurgau. He is concerned with fairness towards normal earners, who cannot count on state support in an emergency if their company gets into serious difficulties. And he wants to minimize the potential for false incentives through overly aggressive bonus models. «The remuneration paid by the big banks to their top employees has reached a level that is no longer in proportion to the work performed,» he says.
Extremely Questionable in Terms of State Policy
However, the initiative does not create more justice. Rather, it is a breach of taboo, an extremely questionable process in terms of state policy: the state should interfere in the private sector to an undue extent. Banks, even the really big ones like UBS, are companies under private law. The situation is not quite the same with the cantonal banks, where the state is the owner or at least the main shareholder.
In addition, the question arises as to whether such behavior is legally permissible at all or whether, as Peter V. Kunz, full professor of commercial law, recently suggested in «Blick», it is a violation of economic and contractual freedom.
A clawback clause, with which variable remuneration can be blocked, revoked or even reclaimed over a longer period of time, would be a more effective instrument than salary caps and would also be legally permissible.
Banks: Once Courted, Now Hated
Swiss banks used to be courted in Bern. Today, they can't be shackled enough. Both are wrong. The latter not only weakens Swiss banking but also the Swiss economy to a considerable extent.
The discussion about tightening capital requirements threatens to be the next blow to the domestic banking center. The Social Democrats have made it clear that they do not want to leave it at that. «The monster UBS represents an unsustainable risk for the Swiss economy. UBS must therefore be downsized and made more crisis-proof through higher capital requirements,» demanded Roger Nordmann, SP National Councillor and member of the CS-PUK, recently.
A big Swiss bank in bonsai format? That doesn't work.
Time for a Rethink
Once the banks have been brought to heel, the insurance companies are likely to follow quickly. International competitiveness will fall by the wayside. The consequence of this: more and more players will turn their backs on the Swiss financial center.
It is not offshore locations such as Hongkong, Singapore or Dubai that are making life difficult for Swiss banks. The greatest threat to them comes from domestic politics. It is high time for a rethink in Bern.
