Franc re­places banks as main eco­nomic con­cern

The Pak Banker - - Front Page -

BERN: The Swiss econ­omy per­formed a steady if un­spec­tac­u­lar re­cov­ery in 2010, but now faces an un­cer­tain 12 months ahead in the face of a con­tin­ued Euro­pean debt cri­sis.

While reg­u­la­tors and the govern­ment were busy restor­ing sta­bil­ity to the fi­nan­cial sec­tor, the eco­nomic woes of Euro­pean neigh­bours sent the franc spi­ralling through the roof to the detri­ment of Swiss ex­porters.

There was a dis­tinct lack of cham­pagne bot­tles be­ing uncorked dur­ing the fes­tive sea­son last year, but the fi­nan­cial sec­tor was still left with a ma­jor han­gover at the start of 2010. A govern­ment deal be­tween Switzer­land and the United States to re­lease the de­tails of thou­sands of UBS ac­count hold­ers was chal­lenged in the Swiss courts in Jan­uary, while par­lia­ment had yet to rub­ber stamp the con­tro­ver­sial plan.

To make mat­ters worse, stolen Swiss bank data was be­ing bought by Euro­pean gov­ern­ments de­spite Switzer­land agree­ing to rene­go­ti­ate dou­ble tax­a­tion agree­ments.

But par­lia­ment agreed to the UBS deal in the sum­mer. And the au­tumn saw Ger­many and Bri­tain agree in prin­ci­ple to deals that could pre­serve Swiss bank­ing se­crecy and solve the thorny is­sue of tax evaders hid­ing money in Switzer­land.

By this time, the heat on Switzer­land had cooled con­sid­er­ably as pow­er­ful coun­tries found they had other prob­lems to ad­dress.

Reg­u­la­tors were also work­ing hard to strengthen the foun­da­tions of Swiss banks. Fol­low­ing the lead of in­ter­na­tional coun­ter­parts, the Fi­nan­cial Mar­ket Su­per­vi­sory Author­ity (Finma) added a "Swiss fin­ish" to re­vised global stan­dards to com­pel do­mes­tic banks to hedge risks even more strin­gently than in­ter­na­tional com­peti­tors.

It re­mains to be seen what mea­sures are adopted by the in­ter­na­tional fi­nan­cial com­mu­nity and what ef­fect they have on the land­scape. But there were en­cour­ag­ing signs that Swiss banks were start­ing to re­turn to health dur­ing 2010. UBS, Europe's worst hit bank from the sub­prime fi­nan­cial melt­down, recorded a profit in the fi­nal quar­ter of 2009. The trend was con­tin­ued for the first nine months of 2010 and the bank has also man­aged to stem the tide of as­sets with­drawn from its wealth man­age­ment busi­ness. -PB News

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