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Switzerland Adopts Financial Market Policy

by Ulrika Lomas,, Brussels

26 December 2012

The Swiss Federal Council has recently adopted an overview of financial market policy.

Included are measures to boost the competitiveness of the financial centre and to combat abuses in a more targeted manner. Outlined in a report, all of the measures aim to maintain and to improve the quality, stability and integrity of the financial centre.

Commenting, the Swiss Federal Department of Finance (FDF) states that: “The strategic orientation of Switzerland's financial market policy is geared towards boosting competitiveness, combating financial crime and the investment of untaxed assets in Switzerland more intensively, concluding international withholding tax agreements with more countries and enshrining standard-compliant administrative and mutual assistance in law.”

The FDF notes that: “A package of measures, each consistently focused on the objectives of quality, stability and integrity, should help to ensure that the framework for the Swiss financial center is optimized and respected internationally.”

The FDF says: “Traditionally strong in wealth management, Switzerland's financial market has growth potential above all in the areas of asset management, pension funds and the capital market. In order to be able to better exploit this potential, the Federal Council is prepared to undertake an in-depth analysis of the business environment for the financial center. Regulatory and tax adjustments should not only improve conditions for existing business areas, but also enable the private sector to develop new business areas.”

It continues: “The Federal Council is stepping up its efforts to combat abuses in the area of money laundering and taxation. By swiftly implementing the revised Recommendations of the Financial Action Task Force (FATF), Switzerland is emphasizing that it attaches high priority to the obligations it assumes through its international commitments. Serious tax offences will now be punishable also under the heading of money laundering. In the event that they suspect serious tax offenses, financial intermediaries must report these cases to the Money Laundering Reporting Office Switzerland.”

“Furthermore, withholding tax agreements, administrative and mutual assistance in accordance with the international standard and additional due diligence requirements represent effective and forward-looking means of combating abuses in the area of taxation. At the same time, they can help ensure that the legitimate need for protection of clients' privacy is preserved. Switzerland will therefore continue to consistently pursue the route that it has followed since 2009 to resolve problems in the area of taxation. The agreements with the United Kingdom and Austria should be followed by agreements with other countries both within and outside Europe.”

“When accepting new assets, financial intermediaries should take into account not only the risks of money laundering and terrorist financing, but also tax considerations.”

On December 14, 2012, the Federal Council instructed the FDF to present a corresponding consultation draft at the start of 2013. The aim of the due diligence requirements is to prevent the acceptance of untaxed assets. As with the due diligence requirements for combating money laundering and terrorist financing, the scope of the examination is based on the degree of risk posed by the contracting party.

The consultation procedure on the improvement of due diligence requirements in the area of taxation will commence at the same time as that on the implementation of the revised FATF Recommendations.

Concluding, the FDF emphasizes that: “The accompanying measures take particular account of the close ties between the financial sector and the wider economy. Both companies and households are reliant on a financial center which functions properly and which can satisfy the various client needs with a cost-effective and multifaceted product range. This includes not only a developed capital market for corporate financing, but also regulations that ensure that clients are appropriately informed.”

In a joint statement, the Swiss Bankers Association (SBA), the Swiss Insurance Association (SIA), the Swiss Funds Association (SFA) and SIX, as financial market infrastructure operator, took note of the Federal Council proposals on the strategy for the financial center, explaining that they now need to examine them in detail.

They stated: “Strengthening the international competitiveness of the financial center is of great importance given its economic significance and the numerous regulatory challenges both within and outside Switzerland, as well as international pressure.”

“The four organisations therefore welcome the desire of the Federal Council to improve the operating framework for the financial center in such a way that growth potential can be seized in Switzerland and abroad and the financial center can continue to perform its important economic function.”

“Like the Federal Council, the financial centre is acting for a credible strategy of taxed assets.”

Underlining their support for the parameters the Federal Council published recently, the four organisations noted that the parameters comprise self-regulation, a risk based approach and no mandatory self-declaration.

They pointed out that: “The industry is pleased that the report contains proposals to improve the operating framework for a further development of the Swiss asset management industry, the Swiss capital markets, the insurance and pensions market and the financial market infrastructure.”

However, according to the four organisations, core concerns remain key to future arrangements.

They stressed: “When dealing with other countries, interests should be defined and represented jointly by the industry, politicians and officials. Any future regulation must be coordinated with the industry and geared towards boosting competitiveness.”

“Access to important markets outside Switzerland should be secured for the long term. In this context, care should be taken to draft the forthcoming Financial Services Bill and the Financial Market Infrastructure Bill in such a way that they maintain market access to the EU and take account of the diversified nature of the Swiss financial center.”

“Improving the tax framework is a key factor when competing internationally with other locations. In this connection, the phased abolition of the remaining stamp duties, which has already begun, should be swiftly completed, while rapid progress needs to be made with corporate tax reforms.”

“Against this backdrop, the four organisations expect to be involved in all further work so that due account can be taken of industry interests. The Federal Council has proposed many important steps today. Implementation of these is essential and must not be delayed or cast into doubt again.”

TAGS: environment | Finance | Insurance | tax | investment | business | pensions | interest | law | capital markets | insurance | United Kingdom | agreements | withholding tax | Austria | Switzerland | tax reform | regulation | Financial Action Task Force (FATF)

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