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ePaper created 2014-06-16, 15:36:46 | version 1.31.00
We must remember finance is a very important part of our economy. But is regaining trust via sober dialogue possible given all the emotion about pay? Bankers must show restraint on pay. Globali- sation, and especially the rise of investment banking, pushed pay higher. And greater transparency made it possible for everyone to see. As long as banks were successful, high pay may have been frowned upon, but was broadly accepted. But when the financial crisis led to heavy losses – or even bank rescues – it became widely intolerable. Now, after a lull, people again see high pay re- turning for bankers. They don’t understand why bonus pools stay high while profits have fallen. And within the banks themselves, new teams – whether executives or traders – don’t want to be shackled by their predecessors’ legacy. Above all, banks can’t ignore international competition and must retain talent. So what’s the answer? There is no easy one. We’ve already had two referendums in Switzerland; the first – more broadly on shareholders’ rights – was accepted, as I expected. The second – on strictly capping pay – was rightly rejected, in what I’d call a mature decision. What’s essential is that pay – or, more particularly, bonuses – have to be strictly based on lasting performance, including the pos- sibility of clawbacks spread over several years to prevent short-term thinking, and be fully transparent. So is legislation the only answer? In our system the owners of a company and competition decide on pay. And rightly so. But if a company is «too-big-to-fail» and must be rescued by taxpayers in case of failure, the taxpayer also wants a say on pay. And rightly so. Moreover, companies, particularly banks, can only be successful in the long-term if they enjoy public trust and should always bear that in mind, not least when setting pay. But you’ve also got to remember the international competition. And here I’m a bit worried Europeans’ concerns about bankers’ pay aren’t fully reflected in the US or Asia. Eventually, that will have an impact and leave us at a competitive disadvantage. What’s the role of the regulators in all this? Some parts of the financial sector were poorly regulated – take undercapitalised trading desks. And there was much too little focus on how banks in trouble could be closed. A lot has been done on all that, which I really welcome. But I retain some concerns. First, different, and sometimes incompatible, new rules in different countries, and the risk of so called «regulatory arbitrage.» Then no one really knows the cumu- lative impact of all the new regulation – what the greater security will cost in terms of growth, jobs and wealth. So I’d vote for caution at this point: Let’s have a break, first implement what’s been agreed upon, observe the impact and take it from there. Should Switzerland always try to stay ahead in regulation? Yes, I think so. Political and economic stability, neutrality, they all play a role in Swiss banks’ attraction. But so does their stability and the stability of our financial system in general. Remember the key role of wealth management for our banks! So how do you see the future for Swiss finance? Very positive, overall. Wealth management has always been our strong point and that’s what we should continue to focus on. Investment banking will also remain a good business, although with a smaller size than in the past. In private banking, with changed conditions regarding secrecy and tax compliance, we obviously have to confront some challenges. We’re in a long run transition. But Swiss advantages like excellent service, language proficiency, stability remain and will continue to support our banks’ well established franchise. That’s not easy to find elsewhere, or to copy. I have no doubt Switzerland’s traditional strengths will come through again. «I have no doubt Switzerland’s tradi- tional strengths will come through again.» 22 Oec. Juni 2014 FOKUS