Switzerland Says the EU Is Trying to Weaken Its Financial Center

(Bloomberg) -- Switzerland says it fears the European Union is out to undermine its financial industry by granting Swiss stock exchanges only a temporary regulatory green light.

Using strong language, President Doris Leuthard said the EU’s decision to allow cross-border stock trading for just a year -- rather than on the indefinite basis accorded to other countries -- was a “clear case of discrimination” that risked “harming bilateral relations on other important dossiers.”

“Switzerland fulfills the conditions for recognition of stock market equivalence every bit as much as the other third countries that have been granted indefinite recognition,” Leuthard said at a press conference in Bern on Thursday. “The government has the impression that this decision by the European Union is intended to weaken Switzerland’s financial sector.”

The European Commission, the EU’s executive arm, on Thursday formally adopted the decision finding Switzerland’s regulations sufficient to allow EU market participants to continue trading on Swiss exchanges for a year, after markets trading directive MiFID II comes into force on Jan. 3. The Commission said that given the amount of cross border stock trading with Switzerland, the ramifications of the decision were greater than in the case of the U.S., Hong Kong and Australia.

Switzerland’s financial sector contributed 9.1 percent to economic output last
year, a higher share than in the U.K. or Germany. The city of Zurich -- home of UBS Group AG and Credit Suisse Group AG -- is the highest ranked financial center in continental Europe, according to the Global Financial Centers Index.

The Swiss government said it doubts the EU’s decision is legal and that it was beginning work immediately to shore up the stock exchange and financial industry. The Finance Ministry has until the end of January to come up with detailed proposals, including abolishing stamp duty on securities transactions, Leuthard said.

Not everyone was discouraged by the EU’s decision. Stock market operator SIX Group said while it welcomes any steps that strengthen the Swiss financial market place, it expects Switzerland “to ultimately achieve full exchange equivalence,” spokesman Stephan Meier said.

Switzerland’s disapproval comes just as relations with Brussels appeared to have improved, with Leuthard and European Commission President Jean-Claude Juncker last month saying they were confident that a so-called institutional framework agreement would be concluded in early 2018 after years of negotiations.

“The government has always defended the further development of bilateral relations and has set the continuation of negotiations on an institutional agreement as an objective for 2018,” Leuthard said on Thursday. “It also recognizes that significant differences still exist. A prerequisite for overcoming these differences is the willingness of both parties to hold objective discussions in an atmosphere of trust.”

--With assistance from Jan Dahinten

To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss, Jan Dahinten

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