thomas jordan : swiss banking centre – a great past and a successful future? speech by mr thomas jordan, chairman of the governing board of the swiss national bank, at the swiss international finance forum, berne, 20 may 2014. * * * the speaker would like to thank till ebner for his valuable support in preparing this speech. he is also indebted to rita kobel, marco huwiler, peter kuster and the snb language services for their assistance. introduction history has shown that important international banking centres can develop in small countries as well as large ones. switzerland is an excellent case in point. during the course of the 20th century, the banking centre in this country became one of the world leaders in wealth management. with the associated creation of value and employment, the banking industry was transformed into a cornerstone of the swiss economy. however, for some years now, the prominent international role of the swiss banking centre has been subject to increasing criticism. given this situation, switzerland and its banks are confronted with a fundamental question : can switzerland, as a relatively small country, continue to provide a home to a banking centre whose importance is global in nature? in my view, this is possible as long as the following three prerequisites are fulfilled : the services offered by the banks, their crisis resilience and their reputations must all be considerably above average. it is up to the banks themselves, first and foremost, to fulfil these prerequisites. at the same time, politicians and the authorities have the task of creating the business conditions which will support the banks in fulfilling these prerequisites. with the business conditions in mind, i will comment today on four factors which i regard as essential : first, relevant and effective regulations ; second, maintenance of switzerland ’ s economic and political stability ; third, protection of the privacy of honest tax - paying bank customers ; fourth, ensuring access to foreign markets. i would like to begin, however, by talking about the economic importance of the banking industry for switzerland, as well as the fundamental challenges faced by this industry at present. economic importance of the banking centre in switzerland the banking system is often described as the life blood of the economy. with good reason. general economic prosperity and the development of the banking industry are closely related. when intermediation between capital supply and demand works well, a significant contribution is made to the prosperity of a country. 1 it works the other way round, too. the banking centre

a major intervention in an institution ’ s corporate strategy. naturally the snb is aware that there are advantages to size. for this reason, the advantages and disadvantages of such a measure would have to be examined and weighed up very carefully. nevertheless, in the case of the large international banks, the empirical evidence would seem to suggest that these institutions have long exceeded the size needed to make full use of these advantages. it should be noted that although the instrument of size restriction is far - reaching, it is by no means new in economic policy. for decades it has been one of the tools for preventing market dominance in the area of competition policy. within the context of financial stability, the objective of such a measure would be to reduce risks to the stability of the banking and financial system, rather than to maintain competition. i would like to run through the last few points again briefly. in the short term, priority must be given to overcoming the crisis. however, in order to increase the stability of the financial system in the medium to long term, we consider a reform of the operational environment in the banking sector to be essential. we attach particular importance to alleviating the “ too big to fail ” problem. apart from stricter rules for systemically important institutions, the snb currently envisages two further options that it intends to examine – first, measures to facilitate the wind - down of large, international institutions and, second, direct and indirect measures to limit their size. the snb will examine all of these in depth, in close collaboration with finma, alongside possible further options. there can be no more taboos, given our experiences of the last two years. the role of the authorities what are the lessons to be learnt from this crisis with respect to the role of the authorities? if the regulatory progress we are aiming for is also to be enforced, we need strong authorities. this applies, on the one hand, to finma, which is charged with oversight of individual banks, or microprudential oversight. finma needs sufficient qualified resources to fulfil its oversight responsibilities. on the other hand, the snb must step up its own activities through an even closer collaboration with finma and also by reinforcing our macroprudential oversight. unlike finma, the snb does not supervise banks. we do not focus our attention on individual institutions but on the banking system as a whole. our macroprudential oversight is largely complementary to the microprude