Swiss Finance: Capital Markets, Banking, and the Swiss Value Chain

397 Pages·2012·4.51 MB·English

by  Henri B. Meier, John E. Marthinsen, Pascal A. Gantenbein(auth.)

Additional Praise for Swiss Finance
“A comprehensive guide to Swiss financial markets’ strengths, weaknesses, and
challenges.”
Prof.GiorgioBehr,CEOandOwnerofBBCGroup,Professorat
UniversityofSt.Gallen,Switzerland
“An insightful guide through decades of development of the Swiss capital
markets.”
Prof.ThomasBieger,President,UniversityofSt.Gallen,Switzerland
“A fascinating and comprehensive guide to the Swiss financial markets as they
historicallyevolvedanddevelopeduptotheircurrentprominentpositioninthe
world.Thebookexplainsinamostinterestingandthoroughwaythemultifaceted
strengths of the Swiss financial economy, but it also opens the eyes for exist-
ing shortcomings and challenges ahead. A ‘must read’ for practitioners and aca-
demicsalike.”
Prof.HennerSchierenbeck,formerProfessorofBankManagementand
Controlling,UniversityofBasel,Switzerland
“ExcellentanalysisoftheinterconnectionsamongSwitzerland’sfinancialinstitu-
tions,currency,centralbank,andglobalfinancialmarkets.”
Prof.BurkhardSchwenker,ChairmanandformerCEO,RolandBerger
StrategyConsultants
“This book is particularly beneficial to practitioners because of the clear way in
whichitillustratesdifferentaspectsoftheSwisscapitalandmoneymarket.”
Dr.PierinVincenz,ChairmanoftheExecutiveBoard(CEO)of
RaiffeisenGroup
“ThisbookistheperfectantidotetothemythsthataboundabouttheSwissfinan-
cial center. It is a must read for anybody working in the financial services sector
in Switzerland or in offshore private banking globally. The book helps us to un-
derstandtheimportanceandinterplayofpoliticalstability,safety,ruleoflawand
directdemocracy.”
Dr.KlausWellershoff,CEO,Wellershoff&Partners;formerChief
Economist,UBS
SWISS FINANCE
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SWISS FINANCE
Capital Markets,
Banking, and the
Swiss Value Chain
Henri B. Meier
John E. Marthinsen
Pascal A. Gantenbein
TheRobertW.KolbSeriesinFinance
JohnWiley&Sons,Inc.
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Copyright(cid:2)C 2013byHenriB.Meier,JohnE.Marthinsen,andPascalA.Gantenbein.
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LibraryofCongressCataloging-in-PublicationData:
Meier,HenriB.,author.
Swissfinance:capitalmarkets,banking,andtheSwissvaluechain/HenriB.Meier,
JohnE.Marthinsen,andPascalA.Gantenbein.–1
1onlineresource.–(RobertW.Kolbseriesinfinance)
Includesindex.
ISBN978-1-118-13126-8(hardback);ISBN978-1-118-26316-7(ebk);
ISBN978-1-118-23853-0(ebk);ISBN978-1-118-22508-0(ebk)
1.Finance-Switzerland. 2.Banksandbanking,Swiss. 3.Capitalmarket-Switzerland.
I.Marthinsen,JohnE.,author. II.Gantenbein,PascalA.,author. III.Title.
HG186.S9
332.09494–dc23
2012018137
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
InmemoryofthegentleandkindspiritofBrigitte,
wholeftusfartooearly.
Contents
Preface ix
Introduction 1
1 FinanzplatzSchweiz 7
2 TheSwissBankingSystem 37
3 SwissBankingSecrecy 97
4 SwissInstitutionalInvestors 151
5 SwissNationalBankandMonetaryPolicy 181
6 SwissFrancsintheGlobalExchangeMarkets 209
7 SwissDebtMarkets 243
8 SwissEquityMarkets 275
9 SwissDerivativeMarkets 311
10 SwissTaxesonInvestmentandFinancing 349
ConclusionandOutlook 365
AbouttheAuthors 373
Index 377
vii
Preface
Theoriginsofthisbookareina1982to1983trainingguidethatHenriMeier
wrote for Swiss investment bankers and his staff, while he was head of
Investment Banking at Handelsbank NW in Zurich, Switzerland. At that
time, there was scarcely anything written on the subject, so his publication filled
agapingholeintheliteratureand,intheprocess,helpedtorevealmajorsources
of Switzerland’s financial success.1 This early guide was expanded into a book-
lengthmanuscript,published,andrefreshedperiodically.Duringthe1980s,Swiss
investmentbankingwaspurelyacustomer-servicebusiness,andSwitzerland’sfi-
nancial function was mainly to act as a financial turntable, taking in foreign pri-
vatedepositsandinvestingtheminhigh-qualityinvestmentsabroad(i.e.,outside
Switzerland)—ofteninthesamecountriesfromwhichthesavingsoriginated.
In 1995, Henri Meier invited John Marthinsen, Professor of Economics and
International Business at Babson College, to co-author the manuscript. John
MarthinsenhadextensiveknowledgeoftheSwisscapitalandmoneymarketsfrom
hisacademicwork,whichfocusedoninternationalbankingandfinance,andmore
thanadecadeofconsultingworkhehaddoneforHandelsBankNW(Zurich)and
RocheHolding(Basel).Duringthe1990s,Europeanfinancialmarketswereexperi-
encingrevolutionarychanges,andSwitzerland’sfinancialinstitutionsandleaders
were at the tip of the rebellion. As a result, the 1996 edition was well received,
appearingsquarelyinthemiddleofthisremarkabletransformation.2
Sincethe1990s,therevolutioninEuropeanandSwisscapitalmarketshascon-
tinuedunabated,andthereseemstobenoendinsight.Therefore,thisbookcanbe
viewedasifitwerebutafewsignificantframesinthemiddleofalongandinterest-
ingmovie.Duringthepast20years,drasticchangeshavetakenplaceinSwisscor-
porategovernance,regulation,financialstructures,andinstitutions,while,along
theway,macroeconomicconditionshave,attimes,beenturbulent.Notonlywere
theretwomajorfinancialcrises,withscopetobringtheglobaleconomytoitsknees,
buttheworldwitnessedthebirthoftheEuropeanMonetaryUnionandtheeuro,
whicharenowthreatenedbycurrent-daydebtcrises.
Conditions have changed so much during the past two decades that we de-
cidedafreshlookatthecurrentSwissfinancialmarketswasneeded.SwissFinance:
Capital Markets, Banking, and the Swiss Value Chain explains the present-day state
ofSwisscapitalandmoneymarkets,butratherthanjustcapturingthehere-and-
now,itprovidesinsightsintohowSwitzerlandgottowhereitistoday.Thisdaunt-
ing task was made easier by the knowledge, skill, and drive of Professor Pascal
1HenriB.Meier,SwissCapitalMarkets(London:EuromoneyBooks,1983).
2HenriB.MeierandJohnE.Marthinsen,Switzerland:AGuidetotheCapitalandMoneyMarkets
(London:EuromoneyBooks,1996).
ix
x Preface
Gantenbein, Professor of Financial Management at the University of Basel, who
HenriMeierandJohnMarthinsenaskedtojoininthiseffort.Fromthecourseshe
hastaughtatSwissuniversities,suchastheUniversityofBaselandUniversityof
St. Gallen, and the consulting he has done at Swiss and foreign financial institu-
tions,PascalGantenbeinhasgainedadeepknowledgeandunderstandingofthe
Swisscapitalmarkets.
Wehavewrittenthisbookwithagoalofmakingitapproachablebyallread-
ers,butifthereisabias,itisclearlytowardpractitionerswhowanttounderstand
themultifaceteddimensionsofSwitzerland’scapitalandmoneymarkets.Wehope
thatreadersfindinthisbookanswerstooneofthemostimportantquestionsre-
latedtocurrent-daySwitzerland,namely,“Howisitpossibleforasmallcountry
in the middle of Europe and surrounded by financial giants, like Germany and
France,tohavewieldedsuchpower(andforsolong)intheglobalfinancialmar-
kets?” Though the content has changed drastically, the aim of this book remains
truetothegoalsHenriMeiersetwhenhewrotehisfirsttrainingmanualsome30
yearsago.
This book has benefited in many ways from the thoughtful feedback of nu-
merousindividuals.Itiswithheartfeltthanksthatweacknowledgecontributions
fromthefollowingindustryexpertsandleadingacademics,whoreadchaptersof
ourbookwithcareandtookthetimetoprovideuswithinsightfulfeedback:
• Dr.KatrinAssenmacher,HeadofMonetaryPolicyAnalysis,SwissNational
Bank.
• Armin Bischofberger, Managing Director Global Fixed Income, UBS AG,
ZurichOpfikon.
• Dr. Peter Buomberger, Group Head of Government and Industry Affairs,
ZurichFinancialServicesLtd.,Zurich.
• Benedikt Hentsch, Chairman of the Board, Banque Benedikt Hentsch Fair-
fieldPartnersSA.
• Dr. Urs D. Kubli, Leiter Kapitalmarktberatung, Zu¨rcher Kantonalbank,
Zurich.
• BrunoPfister,CEOSwissLife,Zurich.
• Karl Reichmuth, Chairman of the Board, Reichmuth & Co. Banquiers,
Luzern.
• AndreasStaubli,ManagingPartner,LeaderTax,LegalandHRSSwitzerland,
PriceWaterhouseCoopers,Zurich.
• Dr.SimonStreule,CorporateDevelopment,SIXManagementAG,Zurich.
• Dr.BenediktSuter,Lawyer,PartnerLenzCaemmerer,Basel.
• Dr.MathiasZurlinden,EconomicAnalyst,SwissNationalBank.
Wewerealsoassistedbyacompetentanddedicatedgroupofresearchassis-
tantsandcolleagues,whoretrievedmountainsofinformation,uncoverednumer-
ous facts, and helped to piece together this book. Our warm and sincere thanks
goto:
SimonBader,RetoForrer,YuFu,Vale´rieHerleth,NilsHerold,DanielKolp,Joe
Martins,DanMazor,StaceySicard,Dr.ChristopheVolonte´,andDr.SimonZaby.
Finally, this book benefited greatly from the patience, goodwill, and sup-
pressed(albeitthinlyveiled)exasperationofourlovedones.
HENRIB.MEIER
JOHNE.MARTHINSEN
PASCALA.GANTENBEIN
Swiss Finance: Capital Markets, Banking, and the Swiss Value Chain
by Henri B Meier, John E. Marthinsen and Pascal A. Gantenbein
Copyright © 2013 Henri B. Meier, John E.
Marthinsen, and Pascal A. Gantenbein
Introduction
Unencumbered capital markets allocate financial resources to their best
value-creating uses for the growth and prosperity of the world. Despite
the shortcomings, failures, and mishaps in Switzerland’s financial devel-
opment,thenation’ssuccessestodatecanbetracedtofinancialleaderswhochose
therightpathsmoreoftenthantheychosethewrongones.Nofinancialsystemcan
restonitslaurels,whichiswhySwitzerlandfaceschallenges,theresultsofwhich
willdeterminethefuturewellbeingofitscitizenry.
Since the introduction of large scale private and public social security
systems—in particular, pension plans—during the twentieth century, an ever-
larger portion of business earnings have been siphoned from the direct reinvest-
ment process to collective savings pools, where the capital markets have been
responsible for their distribution. To efficiently allocate these financial resources,
markets require intermediaries and legal financial structures that open funding
channelstotrulyefficientandinnovativeenterprises.
It is beyond the scope of this book to devise revolutionary plans that might
redefinetheglobalcapitalandmoneymarketsystems,butindescribingtheSwiss
capital markets, attention is drawn to a nation where changes, adjustments, and
improvements have been reactive more often than they have been proactive—
responding to urgent needs rather than anticipating them. In short, financial
storms and disasters, as well as pressures from international powers, have been
themajorcatalystsforsignificantchange.Supervisorybodieshavereactedtothe
samestimuli.
Emergencyconditionshavefrequentlybeenthesparksinitiatingseasonedand
consideredglobalfinancialleaderstositdownattheirdrawingboardstoredraft
ourfinancialsystem.Theproblemisthatgoodintentionsdonotmeangoodwill
alwaysbedone.OneneedlooknofurtherthantheBrettonWoodsSystem,which
was created near the end of World War II under the threat of troops returning
home to nations without jobs and in financial despair. The intent was unques-
tionablypositive,butwearestilldisputingitsnetbenefitsyearsafterthesystem
failedin1971.Similarly,the2010Dodd-FrankActintheUnitedStateswaspassed
in reaction to the devastating effects of the sub-prime crisis from 2007 to 2009.
It was the most far-reaching U.S. financial act since the Great Depression, but in
thecalmerwatersofourcurrentworldeconomy,itsvalueisbeinghotlydebated.
Now,in2012,thedevelopedworldfindsitselfonthebrinkofanewfinancialcrisis,
whichistheresultofrecklessspendingandexcessiveindebtednessbyahandfulof
Europeancountries.Thissituationwilllikelypromptsignificantfinancialreforms,
but the real issue is whether these reforms will, one day, be the seeds of their
ownundoing.
1