Swiss Banking - Annual Report 2012

SwissBanking
Annual Report 2011/2012
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Contents
Chairmans Foreword Reports from the Commissions Areas of Responsibility within the Office Association Business Accounts Organs of the Swiss Bankers Association Bank Institutions Utility Infrastructure Providers, Associations and Federations
E-Mail contact Blog
36
Banking regulation
8 Sustainability
Approaching a trilemma more...
20 100 years of SwissBanking
30
44 48 50
Dynamism in capital adequacy and liquidity more...
Looking to the next 100 years with confidence more...
58 62
Clean money strategy
14 Shadow banks
26
70
How banks are aiming to ensure tax compliance more...
Under the watchful eye of the regulators more...
The Swiss Bankers Association
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4 4
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Chairmans Foreword Patrick Odier
the works taking place in the Swiss financial centre.
Tax agreements into extra time

As tough as the negotiations on the tax agreement between Switzerland and Germany were, the process of political approval has been even more drawnout. The political debate is particularly heated in Germany. Also, an additional protocol modifying the tax agreement with this country has been signed. The adjustments have not affected the main provisions of the agreement, however, so we were able to give them our full backing. The agreements with the UK
ear Reader In this special centenary year for the Swiss Bankers Association, there is no doubt that our financial centre has rarely faced so many challenges. The situation reminds me of a motorway with roadworks everywhere: no sooner is one finished than
another begins. Sometimes they are miles long and it is difficult to see what progress is being made. In other places driving is difficult and dangerous, and the route can change overnight. And yet: its going ahead. It is easier to drive on the new road and journeys are completed more quickly and safely. It is the same for us. Lets take a quick tour of
and Austria were less politically controversial and have been ratified. In June 2012, the Swiss Parliament also gave its approval to all three agreements. Directly after that, a referendum was called by groups on the left and right of the political spectrum. We are convinced, however, that Swiss voters will not be misled and will recognise that the tax agreements are not just in the interest of banking customers, the countries signing the agreements and the banks, but above all are beneficial for Switzerland, the Swiss economy and the Swiss workforce. But it is not just in our country that political forces are
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resorting to all the democratic means available, even at the risk of failure. In Germany too, the federal states governed by opposition parties, which represent a majority, are trying to use the tax agreement as an electoral issue, often using aggressive rhetoric. I remain optimistic, however. Towards the end of this year, there will be a historic opportunity to end these decade-old roadworks once and for all, and to drive on new, improved roads in future. I hope all those involved can achieve this, because it is clear that to change course would not be possible or sustainable. We need to complete the work we have started, and build a road that is fit for the future.
US cross-border and FATCA issue major steps towards our goal

Another example of lengthy roadworks, which in this case have also become highly dangerous due to oncoming traffic, is the cross-border issue with the US, which unfortunately escalated again last year following the indictment of Wegelin bank. Switzerland has made a number of concessions to the US in the past few months, for example as regards questions of administrative
assistance. Particularly worth mentioning are the additions to the double taxation agreement, which permit group enquiries based on behavioural criteria. The US now needs to show that it is interested in finding a mutually satisfactory solution to the negotiations. For banks in Switzerland, the main concern is still to find a final solution that covers the entire financial centre. One important part of these roadworks will soon be completed. The Bankers Association was one of the first organisations to highlight the major problems involved in the implementation of FATCA, so it is a highly positive development that Switzerland (and Japan) were able to enter into negotiations with the US. This means that a more sensible form of implementation for FATCA is likely to be found. Unlike the agreements with five European countries, this solution also fits better with our legal system.
Regulation better coordination needed

As regards this third example of roadworks, I would like to refer to the article on page 8, which explains all the regulations in the area of capital adequacy. Effective, reasonable regulation is
important for the Swiss financial centre. For this reason, we have always taken a very constructive approach to new regulation proposals. But we have also had numerous discussions with our regulators in which we have emphasised Switzerlands particularities, advocated a level playing field and in particular highlighted the harmful effects of (too much) regulation. Over the past year, many bankers have told me how important it is for the banking industry, the authorities and politicians to pull together in these difficult times. The same goes for roadworks: in order to make progress, everyone needs to work together, agree on a common approach and coordinate the project. We need to work harder to achieve this in the Swiss financial centre, as this is the only way in which we will be able to improve our competitiveness. A common marketing approach is an essential element of this, and we need to be more pro-active in driving it forward. It is our mission, our task and our responsibility to ensure that our industry continues to fulfil its role as a key partner in the development of our
economy and our employment market with the focus on our clients interests. Despite all the challenges facing us, my conclusion is a positive one. The past financial year has shown that perseverance, persuasiveness and inventiveness are key to achieving success. I would like to thank all of you who have worked on the various projects I have described in this article: your contributions will benefit everyone. This includes the members of our commissions and working groups, and of course, all members of staff at the Office, who have shown tremendous dedication in this centenary year under the leadership of Claude-Alain Margelisch.
Patrick Odier, Chairman
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Banking regulation Dynamism in capital adequacy and liquidity

In some ways, it might seem tempting to blame an aeroplane crash on gravity, because in the most basic sense this diagnosis will always be correct. But what an explanation of this kind cannot do, of course, is explain why aeroplanes usually stay in the air. Methodical discipline is also needed when analysing the causes of the financial crisis the most obvious explanations are not always the best ones. In particular, more subtle interpretations can lead to better answers, and this also applies to banking regulation for the purposes of increasing system stability.
Markus Staub Head of Banking Policy and Banking Regulation
10 Annual Report 2011/2012
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T
Basel III
he past few months have been characterised by both intriguing and alarming regulatory dynamism. Not only have numerous complex regulation projects been pushed forward and approved, but the speed at which regulations are being tightened and the interdependence of different projects have also increased considerably. Below we will look at four current examples of regulatory requirements governing capital adequacy and liquidity.
line with the recommendations of the Basel Committee on Banking Supervision, as the successor model to Basel II. In addition to stricter definitions of regulatory capital and its components, Basel III also imposes considerably tougher requirements as
Anticyclical capital buffer

The second example of the current drive for increased regulation and of reforms connected with Basel III is the introduction of an anticyclical capital buffer. This instrument, which takes the form of an additional but only temporarily applicable capital requirement, is intended to strengthen the resistance of the banking system and help slow down excessive credit growth when this occurs. The above-mentioned revision of the Federal Councils Capital Adequacy Ordinance laid the foundations for this new type of instrument,
The speed and interdependence of regulatory projects have increased considerably.

regards banks capital adequacy. However, the introduction of a leverage ratio, in the sense of an additional capital adequacy requirement without risk weighting, is still subject to a period of observation, and the final recommendations of the Basel Committee as regards liquidity are also still outstanding. In Switzerland, another national working group under the aegis of FINMA has already begun the necessary preparations. Existing liquidity regulation is set to be fundamentally restructured over the next few years with the planned introduction of two new key indicators: a shortterm liquidity coverage ratio (LCR) and a long-term net stable funding ratio (NSFR).
which is to be activated at the request of the Swiss National Bank (SNB), although the decision to activate it will be taken by the Federal Council itself. The anticyclical buffer is a prominent example of a macroprudential instrument, in that it will be applied directly to stabilise the banking system and the economy. It remains to be seen when and on what scale the new buffer will be used in future.
Too big to fail

The third example is of course the Swiss Too big to fail (TBTF) package of measures, which is related to capital adequacy and liquidity regulation and also has specific relevance for the year under review. This package contains specific regulatory requirements for institutions with systemic importance. The Swiss parliament defined the guiding principles in terms of the Banking Act in its autumn session of 2011, and the components of the package relating to the Banking Ordinance and the Capital Adequacy Ordinance have been fleshed out over the past few months. Exceptionally, the Swiss parliament retained the right of co-determination for various central aspects of the pack-
Firstly, on 1 June 2012, the Federal Council approved the revision of the Capital Adequacy Ordinance (CAO), as part of Switzerlands implementation of Basel III. Following on from this, the Swiss Financial Market Supervisory Authority (FINMA) issued several new and revised circulars. This had been preceded by many months of preparations by the national working group charged with implementing Basel III, which our Association was also heavily involved in. The result is that Basel III will enter into force in Switzerland at the beginning of 2013, on time and in
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age, so statutory implementation will also be dealt with by parliament. In addition to its capital adequacy and liquidity-related components, the TBTF package also contains requirements related to risk distribution (reduction of risk clusters) and organisation (contingency planning). Final implementation at statutory level is expected to take place in the autumn session of 2012.
mortgage financing) were recognised by FINMA at the end of May 2012 as the minimum standard under supervis-
With the new self-regulation guidelines for mortgage business the banking sector contributes distinctly to stabilising the real estate market.
ory law and entered into force on 1 July 2012. The banking sector is therefore playing a major role in stabilising the real estate market.
Real estate and mortgages

Fourthly and finally, various regulatory changes specifically affect the real estate and mortgage market, where overheating tendencies can be observed in particular geographical regions (hot spots). A few months ago, we thoroughly revised our guidelines for mortgage business (guidelines governing the examination, valuation and treatment of mortgage-backed loans). Our Association also worked together with the Federal Department of Finance and FINMA to submit a counter-proposal to the tightening of risk weightings for mortgages that was originally planned by the federal government. The corresponding selfregulation measures (guidelines relating to minimum requirements for
equate to a stable banking system. There is an economically justified role for targeted macroprudential regulatory measures to increase the stability of the financial system as a whole. However, it is equally important that regulatory changes are applied in a targeted way to identified areas of weakness and implemented on a proportionate scale. In view of the raft of new regulations that have now been agreed, it will be vital in future to pay close attention to international developments and impli-
side. Likewise, in the reality of the financial markets, regulatory requirements must not impede the momentum of market development and innovation, but rather contribute to the appeal and competitiveness of our financial sector.
markus.staub@sba.ch Massnahmen im Hypothekarbereich: Gut begrndete Zuversicht! (German) EURO 2012 und Bankenregulierung: Gibt es Parallelen? (German)
Careful navigation is vital

Of course, the SBA has given intensive support to all drafted projects. Overall, we support these measures in their current form, which in some cases has been substantially modified. Our detailed response to the four proposals described was published on 16 January 2012 and can be found on our website. To pick up the aeroplane analogy again, a sober analysis of the financial crisis points to one central lesson above all: the recognition that a system made up of stable banks does not necessarily
Macroprudential regulation should increase the stability of the financial system as a whole.
cations for the real economy, so that we do not end up inadvertently flying blind after the measures have been introduced. We should also not forget that stability often results from movement and momentum, as in the principle of aerodynamic lift in the case of the aeroplane, or when riding a bike, where it is only the stabilising centrifugal forces produced by forward motion that prevent the bike from tipping over to one
14 14 Annual Report 2011/2012
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Clean money strategy How banks are aiming to ensure tax compliance
Banks will in future aim to acquire and manage taxed assets. Things were set in motion with the adoption of the standard on administrative assistance in double taxation matters that is incorporated in Article 26 of the OECD Model Tax Convention, and further progress is now being made with the conclusion of bilateral agreements on the withholding tax. There are also plans to implement the FATF (Financial Action Task Force) requirement to classify tax crimes as predicate offences for money laundering, but we do not yet know where these plans will lead.
Renate Schwob Head of Financial Market Switzerland
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veryone is talking about it, and it sounds good, but no one really knows what clean money strategy means. It is an ill chosen term, however, its brevity and conciseness, coupled with the fact that everyone thinks they know what it means, have ensured it has become established in literature and practice. In short, clean money strategy means that from now on, only taxed assets are to be managed in the Swiss financial centre. This
Withholding tax model

The first purpose of this strategy is to deal with the tax-related problems of the past. At the moment, this is being achieved by means of bilateral agreements on a withholding tax, which allows taxpayers to be taxed in accordance with the regulations that apply in their country of residence while preserving their anonymity. The agreements provide for regularisation of the untaxed assets that are already held with banks in Switzerland, and guarantees protection of affected clients privacy. They also oblige the banks to pay any future taxes due on such assets to the Swiss Federal Tax Administration. Agreements have been signed with Germany, the UK and Austria, and the Swiss parliament approved them on 15 June. These agreements are the only way in which the issue of untaxed money that found its way into Switzerland in the past can be approached systematically and not on a case-by-case basis. The problem will not be solved by the often cited automatic exchange of information, nor by clients submitting a tax honesty declaration or self-declaration, which is a particularly popular idea among politicians. But the with-
holding tax model must also look to the future and ensure that foreign clients in Switzerland are taxed in exactly the same way as they would be in their country of domicile, while still safeguarding their privacy. In this way, the
Neither the automatic exchange of information nor the tax honesty declaration for clients are a solution.
interests of the country of domicile will be duly provided for. The SBA is therefore very critical of the fact that groups on the left and right of the political spectrum have called for a referendum. A No vote to the tax agreements would harm Switzerlands interests and be damaging to its financial centre.
From now on, only taxed assets are to be managed in the Swiss financial centre.
sounds simple and easy to understand on paper, but the question of how such a result can actually be achieved remains unanswered. The fog lifted a little in February this year, when the Federal Department of Finance (FDF) published a discussion paper on a strategy for a tax-compliant and competitive financial centre which is the factually correct description of the clean money strategy. The SBA sees various elements of relevance in it.
International administrative assistance in tax matters

The second way in which the strategy of tax-compliant assets is being implemented is by bringing international administrative assistance in double taxation matters into line with global standards (Article 26 of the OECD Model Tax Convention). These internationally recognised standards are being
enshrined in double taxation agreements between Switzerland and other countries. This means that Switzerland has committed itself to providing the relevant signatory states with any information that is likely to be relevant for enforcement of their domestic tax laws, whether or not this has to do with tax offences. The implementation of these agreements is set out in more detailed terms in the new law on administrative assistance in tax matters. The adoption of international standards in the double taxation agreements is forward-looking, although the circumstances to which these measures apply could also be in the past. This step has raised the question of whether Swiss tax authorities should continue to be refused access to bank client data, which would mean they were in a worse position than their foreign counterparts. By way of a reminder, Swiss law makes a distinction between tax fraud and tax evasion. The former is dealt with by the criminal prosecution authorities, who are granted access to bank client data by the Swiss code of criminal procedure. The latter is dealt with by the tax authorities, who have no power to take compulsory measures and therefore cannot access
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bank client data. The discussions are taking place against the backdrop of a criminal tax law that is being revised in any case, and the outcome remains uncertain.
of this FATF requirement is clearly the duty of the financial intermediary to disclose any well-founded suspicion of money laundering. In future, this duty to disclose will also apply to tax crimes.
Tax crimes in FATF standards

Thirdly, and finally, the clean money strategy addresses the issue of how banks can ensure that no untaxed money is deposited with them in future. The current agreement on the Swiss banks code of conduct with regard to the exercise of due diligence (CDB) already prohibits active assistance in tax evasion and the flight of capital. Banks must not provide any assistance to their clients in carrying out acts aimed at
Expansion of due diligence obligations?

The FDF discussion paper mentioned at the beginning of this article debates the possible expansion of the due diligence obligations for financial service providers with regard to investigations into tax honesty. The main idea is to introduce an obligation for clients to submit a tax honesty declaration when a business relationship is established. Following on from the measures to combat money laundering, there is also talk of rejecting business relationships if there are sufficient grounds to suspect that a client does not conduct their tax affairs honestly. The paper also states that a catalogue of grounds for suspicion would need to be compiled. The FINMA Anti-Money Laundering Ordinance is causing some uncertainty: in the case of tax crimes, this Ordinance would also apply to assets that are the proceeds of a crime, and whose origins are to be concealed. But untaxed assets
are legal money that will only become criminal assets if a tax offence that comes under the scope of tax evasion is committed. It would be desirable for the FATF or OECD to develop a standard that offers further help to financial intermediaries. Perhaps Switzerland will be able to play a pioneering role in this, as it has already done with the development of the 40 FATF recommendations, which are based on the Swiss agreement on due diligence.
renate.schwob@sba.ch Weissgeldstrategie Inhalt vor Verpackung (German)
It will be necessary to define a tax offence where the degree of unlawfulness results in it being classified as a crime.
deceiving Swiss or foreign authorities, particularly tax authorities, by means of incomplete or otherwise misleading attestations. However, the question of controlling untaxed money is also relevant in terms of the FATFs decision in February this year to define tax crimes
as predicate offences for money laundering. This decision poses problems not only for Switzerland but for other FATF member countries as well. Under Swiss law, a predicate offence for money laundering must be classed as a Verbrechen (crime), that is, a criminal offence punishable by a prison sentence of more than three years. However, current Swiss tax legislation does not provide for tax offences that are classified as crimes, so it will be necessary to define a tax offence where the degree of unlawfulness results in it being classified as a crime. The interesting aspect
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Sustainability Approaching a trilemma

What is sustainability? In this age of climate change and energy transition, finding the correct response to this question is a not inconsiderable task. While the question is very straightforward, there is no simple answer; it actually gives rise to a trilemma.
Stefan Tobler Strategy Development
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n everyday language we use the term sustainable in a range of ways and to mean very different things. Sustainability as a paradigm has its origins in forestry and refers to a method of forest management whereby trees felled for commercial usage are all replaced with seedlings that grow naturally into new mature trees. The most frequently cited modern definition of the term is the one coined in the Brundtland Report published by the UN World Commission on Environment and Development in 1987: Sustainable development is the kind of development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
in other words designed to allow all members of society to participate in social development. And thirdly, development is sustainable if it is economi-
Sustainability comprises three related aspects: environment, social questions and economy.
cal, in other words focused on shaping economic activity in such a way that it offers a sound, long-term basis for employment and prosperity. These three aspects can be described as target dimensions that can rapidly become conflicting and lead to a genuine trilemma. Energy transition and climate change are two good examples of this problem.
example, harmful emissions can be reduced by producing and consuming less (sufficiency). But it is easy to imagine the difficulties in implementing sufficiency measures in a growth-oriented global economy, both in terms of economic sustainability and from a political perspective. The emphasis is therefore on efficiency measures, the development of technologies and processes to exploit renewable energy sources and ultimately their systematic application. It is highly likely, however, that environmental restruc-
turing based on green growth will need to be financed and in some cases will lead to considerable increases in energy prices over the short to medium term. While Switzerland, being a rich nation, could undoubtedly afford these
Sufficiency measures are difficult to implement in a growth-oriented economy, both in terms of sustainability and from a political perspective.
increases, they would, were it possible to implement such measures globally (as would ideally need to be the case), result in social disadvantage in developing and emerging markets and among the less well-off sections of industrialised societies. So does this take us back to the maxim formulated by Milton Friedman at the end of the 1960s, namely that the only social responsibility of business is to increase its profits?
Environmental, social and economic sustainability three target dimensions

According to this definition, sustainable development comprises three related aspects. Firstly, development is sustainable if it is environmental, in other words geared to protecting nature and the environment and hence ensuring careful use of natural resources. Secondly, development is sustainable if it is social,
Sufficiency, efficiency, or what?

From a social perspective, an environmentally sound planet Earth is desirable. The natural disasters brought about by climate change can lead to massive social and economic upheavals and thus destroy the natural cornerstones of co-existence for the long term. Arresting or even better reversing this trend will call for the environmental restructuring of the economy and society. For
Resolving the trilemma is the challenge of the age

The notion that this kind of environmentally-blind growth gives rise to a situation calling for corrective meas-
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ures geared around climate change and energy transition, as described above, currently appears, from an academic perspective at least, to be an accepted, albeit widely disputed, hypothesis. Resolving this trilemma without resorting to the idea of a Biblical apocalypse, however, is the major challenge of our age. Reason enough, too, for the Swiss financial centre to adopt a sustainable approach to sustainability. While we do not claim to be even close to finding a solution to the trilemma, we should take a brief look at areas where the
institutional investors such as pension funds and limited partnerships or the simplification of project bonds, for example through the creation of public-private risk distribution mechanisms (Europe 2020 Project Bond Initiative).
An Escher system for the 21st century

Furthermore, and were moving into visionary territory here, the development of the modern Swiss economy was founded on the Escher system. The prominent 19th-century figure was almost the perfect embodiment of the cooperation between finance, business and research. Switzerland needed to renew its infrastructure in order to create the basis for broad-based social prosperity, and this meant constructing a railway network that would link the country with its immediate neighbours in every direction. As there were no banks in Switzerland able to finance a project of this magnitude, and Switzerland did not want to be dependent on foreign capital, Alfred Escher, the then vice-chairman of the Federal Polytechnic Institute and President of the National Council, founded Schweizerische Kreditanstalt, the bank that is now
Credit Suisse. But even that wasnt enough. To give the vast numbers of construction workers required for the gigantic infrastructure projects a degree of security against the uncertainties involved in their work, Escher also founded Schweizerische Rentenanstalt (now Swiss Life). Switzerland will not prevent climate change, but as a rich nation it could help promote close cooperation between finance, business and research on the one hand and politicians on the other to identify new solutions that could then be exported to those countries where they are genuinely needed. Switzerland possesses all the prerequisites for developing a new Escher system for the 21st century, and the Swiss financial centre can play a key role in ensuring its success. Switzerlands course for the next 100 years should be set today. More detailed information on the role of the banks can be found in a joint position paper published by Credit Suisse and WWF.
stefan.tobler@sba.ch
Environmentally-blind growth calls for corrective measures geared around climate change and energy transition.
banks can play a role. The question at hand is how major infrastructure projects and a host of small, decentralised investments in the green economy are to be financed. This goes beyond the question of an attractive WACC for network investors (ensuring planning security) to new financing solutions for the feed-in remuneration at cost instrument and the provision of direct placement opportunities for
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Shadow banks Under the watchful eye of the regulators

The shadow banking sector has recently come under intense scrutiny from regulators after it was held partially responsible internationally for the 2007 to 2009 financial crisis. Measures are now being taken to reduce the risks in future. Raphael Vannoni Head of Economic Analysis
t is widely recognised that shadow banks fulfil important economic functions: they result in liquid markets and improve access to credit in the economy. For example, the European Commission believes that in situations where banks are scaling back their balance sheets (a
Shadow banks foster liquid markets and improve access to credit in the economy.
process known as deleveraging), shadow banks step into the breach and sustain the financing of the real econ-
omy. There is no standard definition of the shadow banking sector. The Financial Stability Board (FSB) gives a very broad one, namely that the sector comprises companies and activities outside of the regulated banking sector. Credit creation by means of maturity and liquidity transformation, leverage expansion (as can been seen in the banking system), and a typically short-term financing structure are all characteristic attributes of shadow banking.
regulators and authorities intend to monitor and regulate this business more closely in future. The G20 have
Characteristic activities in the shadow banking sector include credit creation and leverage expansion.
tasked the FSB with carrying out the necessary preliminary work and issuing international guidelines. The majority of the reform proposals are expected to be published by summer 2012, and the G20 is likely to approve the recommendations in the late autumn of 2012.
Working in parallel with the FSB, the European Commission published a Green Paper which was consulted on up to 1 June 2012. This document is, by definition, formulated in relatively neutral terms, but it is very clear about the seriousness of the project. In particular, it moves away from abstract academic concepts and refers to specific types of companies and products. Some associated regulations are already being developed and introduced at national level. In Europe, for example, there is currently a focus on increasing investor protection, while Switzerland is
What regulations are planned?

The shadow banking sector covers a wide range of banking activities, and
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preparing regulations for independent asset managers. The supervision of these managers by FINMA is to be introduced in conjunction with a new financial ser-
What are the main reasons for increased regulation?

Depending on how it is defined, the shadow banking sector is relatively large. According to FSB estimates, the global shadow banking sector comprises half of all banking activity. If it is broadly defined (for example, to include independent asset managers, PostFinance, hedge funds, etc.), its significance for Switzerland is exceptionally high, with an estimated 30 000 individuals employed in the sector. In all likelihood, the FSB and European Commission will narrow the focus to a few critical activities and intermediaries, so the circle of institutions in Switzerland that will be directly affected by the reform is significantly smaller. Activities in the shadow banking sector are extremely complicated and closely connected with the already regulated banking sector. For example, shadow banks make advance payments for the banking sector or secure its financing through the use of money market funds. This can mean that certain problems enter other parts of the financial sector through the shadow banking sector and cause instability in the finan-
cial system. As such, experts believe that shadow banking triggered the start of the crisis and exacerbated the liquidity crisis.
it is seen as particularly important for the banking sector to adopt a coherent position.
raphael.vannoni@sba.ch Schattenbanken zuknftig an der Kandare (German)
Planned requirements need to be harmonised with reforms that have already been launched.
vices law (see also the FINMA position paper Distribution rules). Regulators will therefore have to ensure that additional requirements for shadow banks are closely harmonised with the reforms that have already been launched.
Work to be done
Authorities and industry are in agreement that activities in the shadow banking sector need to be assessed before stricter regulation is introduced, so that the type and scale of the risks can be
Blind regulation is of little merit. Creating transparency about activities in the shadow banking sector should help.
better evaluated and addressed. If stricter regulation is to be imposed, there must be a clear emphasis on activities and not on institutions to avoid creating a new, unregulated shadow banking sector. The SBA is currently establishing its position on shadow banking. A working group of the European Banking Federation, of which the SBA is a member, is preparing its response to the European Commissions Green Paper on shadow banks. Given the complexity of the issue,
30 Annual Report 2011/2012 30
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100 years of SwissBanking Looking to the next 100 years with confidence
The past must be a springboard, not a sofa, said former British Prime Minister Harold Macmillan. And this is the attitude that the Swiss Bankers Association is taking to its centenary in 2012: ready for change and looking to the future. Jean-Marc Felix Head of Strategic Projects
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here have been banks in Switzerland since the 16th century, and an association representing their interests was created 100 years ago. The Vereinigung von Vertretern des schweizerischen Bankengewerbes (Association for representatives of the Swiss banking industry) was established on 16 November 1912, when 316 members and representatives of 159 financial institutions gathered for the foundation meeting in Basel. In 1919 the organisation changed its name to Schweizerische Bankiervereinigung (Swiss Bankers Association, SBA). By the time it reached its 50th anniversary in 1962, it comprised 322 institutional and 1087 individual mem-
This centenary year is not a time for looking back, however, so we will just provide a few highlights of the organisations history, starting with the period after the First World War. One important area of activity was protecting Swiss assets in the European countries that had been at war. There was a similar situation after the Second World War, when the nationalisation of Swiss foreign capital was one of the SBAs major tasks for many years. The focus was on compensation and the restoration of property rights.
portfolio management guidelines and the agreement on the Swiss banks code of conduct with regard to the exercise of due diligence, to name just two. As banks became increasingly internationally focused over the course of time, the SBAs lobbying activities extended more and more to foreign markets. The second half of the 1990s was dominated by the debate surrounding dormant assets from the Second World War. And at the start of the new millennium, the SBA played its part in developing and implementing reforms for tackling the financial crisis. At around the same time, it began to lobby for a tax-compliant financial centre strategy.
tributed to this success, and will continue to do so in the future. The SBA would like to take this opportunity to thank these individuals. A number of aspiring young photographers have taken portraits of 100 people in their everyday working environments for a volume of photographs and an exhibition. Drawn from all age groups, all regions of Switzerland and the whole gamut of professions, including for example an architect, a chimney sweep and a civil servant, they represent the Swiss population as a whole and are an impressive reflection of our society.
Lobbying from the beginning

The 1930s saw the introduction of the Federal Act on Banks and Savings Banks, which enshrined in law the principle of bank-client confidentiality and established a basis for the activities of the Eidgenssische Bankenkommission (Swiss Federal Banking Commission). The SBA closely accompanied the political process already at this time, and it would later do the same for other important legislation relating to areas such as insider trading, the combating of money laundering and the stock exchange regulation. It also led the way as regards self-regulation, for example with its
The association was established on 16 November 1912 as the Vereinigung von Vertretern des schweizerischen Bankengewerbes.
bers, compared with around 350 institutions and almost 18000 individual members in 2012. This shows clearly how the industry, its representative body and the responsibilities of that body have grown.
Thank you and values

But the SBA does not want to focus on itself in this centenary year. Instead, it wants to reflect on the origins of the banks and the traditional values that have made the financial sector strong, and to say thank you. With this in mind, the motto of the centenary celebrations is thank you and values. By international standards, Switzerland compares extremely well in terms of prosperity. Many people in the country have con-
In its centenary year, the Swiss Bankers Association would like to thank the people who have contributed to prosperity in Switzerland.
On our centenary website, everyone is invited to say thank you, whether it is to their partner, to Switzerland, or even to their pet. Video messages can be recorded in a Dankomat and published on Facebook. The thank you and values idea has also been portrayed in a short film. While all this may seem a little out of step with the usual activities of a
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bankers association, the aim is to reinforce trust and understanding. These and the other activities being pursued are finding a larger audience thanks to the diverse network of communication channels used by the member banks, and are taking the thank-you message out to the whole world. One milestone in this centenary year is an international conference in Switzerland, to which participants and speakers from all over the world have been invited. Entitled Swiss Banking Global, it will take place exactly 100 years to the day after the founding of the SBA.
basis responsibility to society, the environment, partners from the political and economic spheres, and of course their customers. The right of customers to expect the highest levels of quality and protection of their privacy is, and will remain, of central importance. It is the task of the SBA to point the way to the future, taking into account the current conditions. The SBAs 2015 Financial Centre Strategy indicates a course of action that will enable previously untaxed assets in Swiss banks to be regularised with a withholding tax, without breaching customers privacy. New money is to be taxed exactly as it is in the countries of origin, and market access will become easier. It is therefore important to drive forward growth areas such as asset management and to improve the legal framework on an ongoing basis. The banks have taken on the challenges of the future and are continuously shaping the process of change. The conditions for a successful start to the next 100 years are in place, and they will benefit not only the financial and business sectors, but also Switzerland as a whole.
jean-marc.felix@sba.ch
Key dates in the history of the Swiss Bankers Association 6.11.1912 1 Foundation meeting of the Vereinigung von Vertretern des schweizerischen Bankengewerbes (Association for representatives of the Swiss banking industry) in Basel with bank managers, board members, partners, etc. as participants (316) 1919 Name changed to Schweizerische Bankiervereinigung (Swiss Bankers Association, SBA) 1.3.1935 Federal Act on Banks and Savings Banks (Banking Act) comes into force 937 1 SBA opens up to deputy directors and members of senior management 1946 Washington Agreement regulates relations between Switzerland and the Allies 947 1 SBA opens up to individual banks 977 1 Chiasso affair involving Schweizerische Kreditanstalt (Credit Suisse); Agreement on the Swiss banks code of conduct with regard to the exercise of due diligence (CDB) 0.5.1984 2 Clear rejection (73%) of the federal popular initiative against the abuse of bank-client confidentiality and the power of the banks .7.1988 1 Insider legislation set out in the Swiss Penal Code 993 1 Stiftung Schweizerischer Bankenombudsman (Swiss Banking Ombudsman Foundation) begins its activities 995 1 Start of litigation concerning dormant assets from the Second World War 1.2.1997 Stock Exchange Act comes into force .4.1998 1 Anti-Money Laundering Act comes into force 2./13.8.1998 1 Swiss Banks Settlement, amounting to USD 1.25 billion, brings an end to the Holocaust Victim Assets Litigation 001 2 SwissBanking is introduced as a brand name
1910
1930

1940

1970 1980

1990

Swiss core values shape the financial sector

The financial industry has reached a turning point, and new answers and strategies are needed. However, traditional strengths and values must not be forgotten; values such as stability, universality, excellence and responsibility, which have set Switzerland and our financial sector apart from the international competition for more than 100 years. Responsibility is particularly important in todays climate. Banks assume responsibility on a daily
2000

1.7.2005 Agreement on the taxation of savings income with the EU comes into force 1.1.2006 Swiss Finance Institute (SFI) is established 009 2 Financial Centre Strategy 2015 is launched Centenary
2012
SwissBanking
Reports from the Commissions

The following section summarises the main business dealt with by the SBAs various commissions in the year under review. A more detailed report, together with the names of all members of the commissions, is available in German and French on the Swiss Bankers Associations website www.swissbanking.org.
Commission for Law and Compliance

The Commission for Law and Compliance met five times in the year under review, and one of these meetings was dedicated to revising the due diligence agreement (CDB). Other issues that are still being handled include FINMAs distribution report and its position paper on distribution rules. The proposals of the supervisory authority will feed into a financial services law, which will be based on the revised European Markets in Financial Instruments Directive (MiFID), while supervision of asset managers is also planned. The commission also focused on the bank restructuring law, stock market and tax offences as predicate offences for money laundering, issues relating to collective investment and cartel law, the clean money strategy and dormant assets, self-regulation for portfolio management mandates and for structured products, the SBAs country information project and current legal developments in the EU, the US and the FATF. Finally, the commission approved two new SBA framework agreements: for exchange-traded
derivative (ETD) transactions and securities lending and borrowing (SLB).

Dr Felix P. Graber, Managing Director and Senior Legal Counsel to the Group Executive Board, Credit Suisse Group AG (Zurich)
Commission for Financial Market Regulation and Accounting

The commission focused in particular on developments relating to capital adequacy and liquidity regulation. For example, it was closely involved in formulating our responses to Basel III, the anticyclical capital buffer, the Too big to fail package and the revision of the FINMA Circular Capital buffer and capital planning in the banking sector. The commission is also the sounding board for the two national working groups under the aegis of FINMA charged with implementing Basel III and revising liquidity requirements. In the area of accounting, the commission analyses the development of international standards (IFRS, US GAAP) and is represented in the joint FINMA working group responsible for
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revising Swiss accounting regulations. Other areas of focus included a position paper on macroprudential regulation, the ongoing audit reforms, specific issues related to netting, and responses to regulatory projects introduced by FINMA and the SIX Exchange Regulation.
Ralph Odermatt, Senior Advisor, UBS AG (Zurich)
Commission for Swiss Client Business

In addition to its tasks relating to business with private and corporate clients, the commission focused on selected regulatory issues, particularly in the area of mortgage business. In view of certain overheating tendencies in the real estate market, the commission comprehensively revised the guidelines governing the examination, valuation and treatment of mortgage-backed loans and responded to the Federal Department of Finances proposals on risk weighting with a counter-proposal allowing for self-regulation. It also gave its support to political projects such as the Bausparinitiative (housing savings
initiative) and various activities related to the introduction of the registered mortgage note. Maintaining relations with the real economy is another key element of the commissions activities, and it holds high-level talks with various associations and organisations on an annual basis. This dialogue has become institutionalised and proved its worth once again in the year under review, particularly as regards changes in the level of the franc. With few exceptions, the members of the commission also serve on the board of the depositor protection association.
Dr Patrik Gisel, Deputy Chair of the Executive Board, Raiffeisen Switzerland (St. Gallen)
Commission for Communications and Public Affairs

The financial crisis in Europe and international tax discussions were the main focus in the year under review. The SBA was active in issuing communications on financial sector strategy and tax agreements, such as an explanatory film that proved very popular. The
commission also maintained close contact with politicians in current key countries. In Switzerland, the public affairs specialists continued their intensive dialogue with politicians and the SwissBanking Bi de Lt series of events, which is helping to boost the regional focus and promote dialogue between the financial and business spheres. The well-established series of Swiss Banking on air events in high schools and Swiss Bankers Club events for members were successfully continued, with 9 and 22 events respectively. There were a number of developments as a result of technological changes: the insight and insight extra publications and this years annual report were all given a fresh new look and from now on will only appear in electronic format. The SBA website was redesigned, and the associations social media presence was expanded. To mark its centenary, the SBA is taking the opportunity to say thank you to the Swiss population in an interactive campaign that is running throughout 2012.
Claude-Alain Margelisch, CEO of the SBA (Basel)
Commission for Institutional Asset Management (IAM)

The commission issued its response to the revision of the Swiss Federal Act on Collective Investment Schemes (CISA). The revision, which focuses in particular on the regulation of asset managers of collective investment schemes, custodian banks, structured products and qualified investors, is of vital importance to the Swiss financial centre. The commission also looked at the Alternative Investment Fund Management Directive (AIFMD). The level 2 measures, which are currently being examined by the European Union and are intended to define the detail of the Directive, will have an impact on third countries such as Switzerland. The commission also issued its response to the draft report released by the Federal Social Insurance Office (FSIO) on the future of occupational pensions, and decided to publish a study on second pillar asset management that provides comparative information on the returns, risks and costs of pension fund investments in Switzerland, the United Kingdom, the Netherlands and the US. Finally, the expert group on Global Investment
SwissBanking
Performance Standards (GIPS), working under the aegis of the commission, issued a statement on the revision of GIPS 2010. It also organised various events designed to provide information on GIPS.
Andreas Schlatter, Group Managing Director, UBS AG (Zurich)
mission closely monitored the parliamentary discussions on the tax aspects of the Too big to fail issue, in particular questions relating to the abolition of stamp duty and the withholding tax exemption for contingent convertible bonds (CoCos).
Fritz Mller, Managing Director, Credit Suisse AG (Zurich)
Federal Prosecutor and Federal Intelligence Service) and supranational (committees of the European and International Banking Federation) organisations.
Christoph Beat Zumstein, Head of Group Security Services, UBS AG (Zurich)
Training Commission Commission for Tax and Finance Policy

The commission worked on a large number of issues arising from the rapid pace of developments in international and domestic tax law. To name just a few of the most striking examples, the commission devoted a lot of its time to the tax agreements concluded with Austria, Germany and the United Kingdom. It was involved in drawing up the implementing provisions and also in the legislative process relating to the Swiss Federal Act on International Withholding Tax, and issued a detailed position paper on the draft bill. It also worked on the impact and implementation of the Foreign Account Tax Compliance Act (FATCA) and submitted a response to the US authorities. Finally, the com-
Commission for Security

The Commission for Security is an advisory specialist and management body for all matters related to security. In the year under review, it dealt with issues relating to physical and IT security, business continuity management (BCM) and economic criminality. For example, it focused on the skimming attacks on ATMs and the associated stop skimming campaign launched by the police (www.stop-skimming. ch), and also gave its support to two federal projects, Protection of critical infrastructures and Cyber crime strategy. The BCM recommendations were also updated in the year under review. The commission also maintains valuable relationships with national (police, government authorities, Office of the
Following the successful establishment of the umbrella communication for basic banking training, entitled SwissBanking I Future, this was developed into a training portal for the banking sector providing information on all levels of education and training. The SBA focused intensively on implementing the new core content of the revised basic commercial training for banks and the bank entry programme for secondary school graduates (BEP), which will be introduced from summer 2012. In the area of advanced training, the commission focused mainly on supporting the HFBF study programme and revising the framework curriculum for the HFBF. In terms of financial literacy, it set up a website providing a guide to general financial education offered
online: www.money-info.ch. The commission was also active in a number of other areas in 2011/12. For example, it worked on building up a network of representatives from selected European countries with a view to exchanging information and experience regarding developments in areas of relevance to banking and finance training, and also looked at issues relating to the accreditation and certification of bank employees and training courses.
Dr Jrg Gutzwiller, Member of the Executive Board of RBA-Holding (Gmligen)
Commission for the Safeguarding of Swiss Financial Assets

The main task of this commission is to provide advice on securities that are issued by companies or by Swiss or foreign public-sector bodies and managed by Swiss banks, where there is a risk of default (suspension of interest payments or redemption on maturity, requests for debt conversion and/or restructuring, etc.). In the year under review, the commission focused in
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particular on the restructuring of Greek government bonds and the possible impact of the debt crisis in Europe on Swiss assets. It also monitored developments connected with the liquidation of the three largest banks in Iceland, Kaupthing, Landsbanki and Glitnir.
Urs Bretscher, Managing Director, UBS AG (Zurich)
Swiss Commission for Financial Standardisation

The main area of focus in payment transactions and securities processing was the roadmap for the ISO 20022 standard. SIX Group appointed a standardisation expert to the ISO 20022 project management team, and this individual became a member of the commission. Another key topic was the ISO 17442 Legal Entity Identifier, which was developed in connection with the central reporting of OTC derivative transactions. The commission ran a workshop on this topic. With reference to ISO TC 68, representatives of the commission took part in 49 votes/standard reviews for the financial sector. As regards the annual
SWIFT standards release, the commission examined the proposed amendments for the 2012 standards release, took part in the maintenance working groups set up by SWIFT and ensured Swiss participation in the voting process. The commission also ran two specialist conferences with the Swiss Financial Forum for Standards and Operations in 2011 on the subjects of funds and securities. The annual payment transactions specialist conference was organised by SIX Interbank Clearing.
Peter Lorenz, Managing Director, UBS AG (Zurich)
paper on the shadow banking sector, about which relatively little is still known. At its meeting on 26 March 2012, the Committee of the Board of Directors of the SBA decided to dissolve the Commission for Economic Policy, as part of the annual commissions review.
Cesare Ravara, Director, Credit Suisse AG (Zurich)
Commission for Economic Policy

The Commission for Economic Policy was the associations think tank for economic issues and issues related to economic and regulatory policies. In the year under review, the commissions work included managing a study on the future outlook for the Swiss banking sector. It was also involved in a wide range of consultations on position papers relating to regulatory issues, and in producing a working
SwissBanking
Areas of Responsibility within the Office

Head Office Basel
Aeschenplatz 7 4052 Basel Postfach 4182 4002 Basel T +41 61 295 93 95 F +41 61 272 53 82 office@sba.ch www.swissbanking.org
Berne Office
Hotelgasse 10 3011 Bern T +41 31 313 37 77 F +41 31 313 37 79
Members of the Executive Committee
Zurich Office
Limmatquai 122 8001 Zurich T +41 44 266 93 00 F +41 44 266 93 01
Claude-Alain Margelisch Lucas Metzger Renate Schwob
Jakob Schaad
Thomas Sutter
Kuno Hmisegger
SwissBanking
Chief Executive Officer Claude-Alain Margelisch / Dep. Jakob Schaad / Dep. Renate Schwob Operations Lucas Metzger*
Logistics Board Office & CEO Human Resources Finances Informatics DB/Support Services Selma Merdan Ursula Zhringer Ernst Buess Martial Schilliger Priska Lanz Thomas Knell
Strategic Development Claude-Alain Margelisch*

Strategy Stefan Tobler Communications Jean-Marc Felix Training Stefan Hoffmann
Economics Martin Hess

Economic Analysis Raphael Vannoni
Training Matthias Wirth

Advanced training Marie-Theres Lorenzon Education Development Stefan Hoffmann
Financial Market Switzerland Renate Schwob* / Dep. Markus Staub

Banking Policy, Banking Regulation Markus Staub Financial Markets Law, Netting Christoph Winzeler Infrastructure, Payment Systems Renate Schwob* Real Estate and Consumer Issues Angela Knuchel Compliance, Money Laundering, FATF, Bank Security Pascal Baumgartner Country Information Fiona Hawkins
Financial Markets International Jakob Schaad* / Dep. Urs Kapalle

Europe, International Legal Issues, Asset Protection Jakob Schaad America-Asia, WTO-OECD-ICC Heinrich Siegmann Institutional Asset Management Mireille Tissot Federal Finance & Tax Policy Urs Kapalle Tax Issues Jean Brunisholz
Communications Thomas Sutter*

Switzerland, Germany Thomas Sutter* Europe Rebeca Garcia Overseas, UK Sindy Schmiegel Werner Web Services Alexandra Arni Events Marlen Melone
Public Affairs Switzerland Kuno Hmisegger*/ Dep. Yves Weidmann

Public Affairs Monitoring Yves Weidmann
* Member of the Executive Committee
SwissBanking
Association Business
Board of Directors and Board Committee
At the General Assembly held on 6 September 2011, the following were elected to the Board of Directors: Mr Joachim H. Strhle, Bank Sarasin & Cie AG (replacing Mr Eduardo Leemann, Falcon Private Bank Ltd., who had resigned from the Board in the previous year), and Mr Alexandre Zeller, HSBC Private Bank (Suisse) SA (replacing Mr Maurice Monbaron, Crdit Agricole (Suisse) SA, who had also resigned from the Board in the previous year). Both members had already been co-opted by the Board of Directors in the previous business year, by way of circular resolution. In the current business year, Mr Peter Siegenthaler, VSKB, and Raymond J. Br, Julius Br Group AG, have resigned from the Board of Directors and its Committee. The Board of Directors also took note of the resignation of Mr Alexandre Zeller, HSBC Private Bank (Suisse) SA. The Board of Directors co-opted Professor Dr Urs Mller, VSKB, to succeed Mr Siegenthaler, and Mr Boris F. J. Collardi, Julius Br Group AG, to succeed Mr Br, on the Board of Directors, and elected both to the Board Committee. a member of the postroom, left the SBA at the end of July 2011. Since 1 October 2011, Stephanie Lorenz has been working as a research assistant in our Financial Markets Switzerland department. Nicole Kohler took over the responsabilities of Corinne Moser, communications specialist, as of 1 November 2011. Daniela Strohmeier, Head of Basic Training, left at the end of November 2011. She was succeeded by Roman Tschopp, who began work on 1 January 2012. On 1 December 2011, Martin Stucki took over from Janick Tagmann in the Public Affairs Switzerland department in Berne. At the same time, Sanja Basic began working as an assistant in the Financial Market Switzerland team, and Thomas Fglister joined the postroom in February 2012. Tax specialist Jeanine Blumer left the SBA on 31 March 2012. At the end of May 2012, Esther Mschler entered a well-earned retirement after long years of dedication. In June 2012, Nathalie Dalcher, Administration and Services, and Janine Dietler, Staff Administration, left the SBA. On 1 August 2012, Alain Schluep joined us to pursue the 2nd year of his commercial apprenticeship (e-profile). In June 2011 the Board of Directors promoted Selma Merdan to Associate Director. Angela Knuchel and Sindy Schmiegel Werner were promoted to the same rank in January 2012. At the end of April 2012, the Associations Office had a permanent staff of 66, representing 58 full-time equivalent positions, plus one secondee.
Office
On 1 May 2011, Caterina De Angelis began working as an assistant in Public Affairs Switzerland in Berne. James Nason, Head of International Communications for many years, left the SBA at the end of June 2011 and was succeeded on 1 July 2011 by Sindy Schmiegel Werner, Head of Communications UK. At the same time, Cline Freivogel took up her position as an assistant in the Communications department and Vanessa Dubra was appointed to the newly created post of research assistant in Financial Markets International. Janick Tagmann, Head of Public Affairs Research, and Benjamin Eberenz,
SwissBanking
Balance Sheet as of 31 December 2011

Assets
In CHF Cash and cash equivalents Accounts receivable Accrued income and prepaid expenses Total current assets Securities and financial assets Movable property and equipment Property Total fixed assets Total Assets 2010 20 381 367 1 039 594 29 783 21 450 744 12 280 751 1 3 700 000 15 980 752 37 431 496 2011 23 266 762 924 792 40 844 24 232 398 9 640 000 1 3 700 000 Total equity capital 13 340 001 Total Liabilities 37 572 399 37 431 496 37 572 399 10 710 516 10 733 479
Liabilities
In CHF Accounts payable Accrued expenses and deferred income Special-purpose provisions Total liabilities Association capital Reserves 2010 1 424 711 935 869 24 360 400 26 720 980 6 961 000 3 749 516 2011 1 522 191 1 121 229 24 195 500 26 838 920 6 961 000 3 772 479
SwissBanking
Income Statement 2011

Income
In CHF Membership fees Financial income Income miscellaneous Release of provisions Total Income 2010 23 437 061 410 351 6 851 517 1 802 600 32 501 529 2011 26 591 223 418 125 2 622 835 152 000 29 784 183 Surplus 85 845 22 963
Appropriation of Surplus
In CHF Utilisation of reserves Allocation to reserves 2010 85 845 0 2011 0 22 963
Notes to the Financial Statements 2011 Expenses

In CHF Operating and commission expenses Personnel expenses General and administrative expenses Depreciation, amortisation and provisions Interest expenses Tax expenses Total Expenses Surplus 2010 17 082 113 11 407 751 2 742 392 1 153 750 250 201 118 32 587 374 85 845 2011 13 834 263 11 719 738 2 558 831 1 130 001 325 399 192 988 29 761 220 22 963 In CHF Fire insurance values of tangible fixed assets Movable property and equipment Property Fair values of securities and financial assets Pledges in favour of third parties Pledged securities 600 000 600 000 2 920 000 18 306 240 13 854 267 2 920 000 18 611 712 10 989 569 2010 2011
SwissBanking
Report of the Statutory Auditors on the Financial Statements

To the General Assembly of the members of the Swiss Bankers Association (SwissBanking), Basel
As statutory auditors we have audited the financial statements of the Swiss Bankers Association (SwissBanking; see pages 50 to 53), which comprise the balance sheet, income statement and notes, for the year ended 31 December 2011. for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditors responsibility
Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit applies procedures to obtain audit evidence about the amounts and other disclosures in the financial statements. The procedures selected depend on the auditors judgement, which includes an assessment of the risks of material misstatement of the financial statements, whether due to
Board of Directors responsibility

The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with Swiss law (Art. 957 ff. of the Swiss Code of Obligations) and the Associations Articles of Incorporation. This responsibility includes designing, implementing and maintaining an internal control system suited to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is also responsible
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fraud or error. In making these risk assessments, the auditor considers the internal control system, to the extent that it is relevant to the preparation and fair presentation of the financial statements, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control system. An audit also includes an evaluation of the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as an evaluation of the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
ber 2011 comply with Swiss law (Art. 957 ff. of the Swiss Code of Obligations) and the Associations Articles of Incorporation.
to the instructions of the Board of Directors. We recommend that the financial statements submitted to you be approved. Basel, 14 May 2012
Report on other legal requirements

We confirm that we meet the legal requirements concerning licensing (Audit Supervision Act) and independence (Art. 69b of the Swiss Civil Code in conjunction with Art. 728 of the Swiss Code of Obligations) and that there are no circumstances incompatible with our independence. In accordance with Art. 69b of the Swiss Civil Code in conjunction with Art. 728a para. 1 point 3 of the Swiss Code of Obligations and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of the financial statements according
Ernst&Young Ltd.
Thomas Schneider
Licensed Auditor (in charge of audit)
Opinion
In our opinion, the financial statements for the year ended 31 Decem-
Stefan Lutz
Licensed Auditor
SwissBanking
Organs of the Swiss Bankers Association

Chairmen since the year of foundation
19121917 19171927 19271946 19461950 19501965 19651986 19861992 19922003 20032009 Since 2009 Pierre G. Mirabaud, Geneva Patrick Odier, Geneva Dr Georg F. Krayer, Basel Alfred E. Sarasin, Basel Dr Claude de Saussure, Geneva Dr Charles de Los, Geneva Bernhard Sarasin, Basel Robert La Roche, Basel Friedrich Frey, Basel Dr h. c. Alfred Sarasin, Basel
Governing Board
Patrick Odier* Chairman, Senior Partner, Lombard Odier & Cie, Geneva Dr Ulrich Krner* Vice Chairman, Member of the Group Executive Board, Group Chief Operating Officer and CEO Corporate Center, UBS AG, Zurich Walter Berchtold* Treasurer, Member of the Executive Board, Credit Suisse Group AG and Credit Suisse AG, Zurich Claude-Alain Margelisch* Delegate of the Governing Board and CEO, Swiss Bankers Association, Basel Jean Berthoud Chairman of the Board, Banque Bonhte & Cie SA, Neuchtel Christian R. Bidermann Partner, Rahn & Bodmer Co., Zurich Boris F. J. Collardi CEO, Bank Julius Br & Co. Ltd., Zurich
SwissBanking
Governing Board
Blaise Goetschin CEO, Banque Cantonale de Genve, Geneva Dr Alfredo Gysi* President of the Board of Directors, BSI SA, Lugano Pascal Kiener CEO, Banque Cantonale Vaudoise, Lausanne Bernard Kobler CEO, Luzerner Kantonalbank AG, Lucerne Prof. Dr Urs Mller Chairman, Association of Swiss Cantonal Banks, Basel Paul Nyffeler* Chairman of the Board (until 13th June 2012), RBA-Holding AG, Gmligen Nicolas Pictet* General Partner, Pictet & Cie, Geneva Herbert J. Scheidt Chairman of the Board of Directors, Bank Vontobel AG and Vontobel Holding AG, Zurich
Martin Scholl CEO, Zrcher Kantonalbank, Zurich Joachim H. Strhle CEO, Bank Sarasin & Cie AG, Basel Dr Pierin Vincenz* CEO, Raiffeisen Group, St. Gallen Stephan Weigelt CEO, acrevis Bank AG, St. Gallen
Auditors
Ernst&Young AG, Basel
* Member of the Committee of the Governing Board
SwissBanking
Bank Institutions
Supervisory Board for the Due Diligence Agreement
Prof. Dr Ulrich Zimmerli Chairman, former Professor at the University of Berne, former member of the Council of States, Muri b. Berne Dr Philippe Amsler Attorney-at-Law, Geneva, lecturer in Banking Law, University of Applied Sciences Western Switzerland, Geneva, former legal consultant with Credit Suisse and Lombard Odier & Cie, Choulex Prof. Paolo Bernasconi Former Professor at the University of St. Gallen, Attorney-at-law and Notary, Lugano, former Public Prosecutor in Lugano Prof. Dr Claude Bourqui Visiting Professor at the University of Lausanne, former Professor at the University of St. Gallen, former Partner with Ernst & Young AG, Commugny Prof. Dr Hanspeter Dietzi Former Deputy General Counsel UBS AG, former Chairman of the Legal Commission of the Swiss Bankers Association, Binningen Prof. Dr Dieter Zobl Former Professor of Private, Commercial and Banking Law at the University of Zurich, former Head of Legal Department with Zrcher Kantonalbank, Rschlikon Georg Friedli Secretary, Attorney-at-Law, Bahnhofplatz 5, 3011 Berne, PO Box 6233, 3001 Berne Robert Fiechter Deputy Secretary, Attorney-at-Law, 4, avenue de Champel, 1206 Geneva
Secretary of the Supervisory Board
Investigators into the Due Diligence Agreement

Daniele Calvarese Attorney-at-Law, via Nassa 21, 6901 Lugano Dr Martin Lscher Attorney-at-Law, Seestrasse 41, 8002 Zurich, PO Box 1878, 8027 Zurich Didier de Montmollin Attorney-at-Law, rue Bartholoni 6, 1204 Geneva, PO Box 5210, 1211 Geneva 11 Dr Beat von Rechenberg Attorney-at-Law, Dreiknigstrasse 7, 8002 Zurich, PO Box, 8022 Zurich
SwissBanking
Swiss Banking Ombudsman Foundation

Annemarie Huber-Hotz Chairwoman, former Federal Chancellor, Berne Paul Hasenfratz Vice Chairman, former CEO of the Zrcher Kantonalbank, Wallisellen Prof. Dr Ulrich Cavelti Chairman of the Administrative Court of canton St. Gallen and former occasional Federal Supreme Court Justice, St. Gallen Prof. Dr Mario Giovanoli Former Professor at the University of Lausanne, Arlesheim Monika Weber Former member of the Council of States, former President of the Konsumentinnenforum der deutschen Schweiz, Zurich Hanspeter Hni Banking Ombudsman Bahnhofplatz 9, PO Box 1818, 8021 Zurich T +41 43 266 14 14 (8.3011.30 am) T +41 21 311 29 83 (8.3011.30 am) F +41 43 266 14 15 www.bankingombudsman.ch Christian Guex Deputy Banking Ombudsman Andrea Pellanda Deputy Banking Ombudsman Rudolf Schenker Deputy Banking Ombudsman PD Dr Christoph Winzeler Attorney-at-Law, Basel Martin Tschan Attorney-at-Law, Deputy Banking Ombudsman Stefan Peter Head, Contact Office German/English French/Italian
Office of the Swiss Banking Ombudsman
Foundation Administrator
Auditors
Ernst&Young AG, Basel
SwissBanking
Swiss Banks and Securities Dealers Deposit Guarantee Association Board

Dr Patrik Gisel Chairman, Deputy CEO, Raiffeisen Switzerland, St. Gallen Barend Fruithof Head Corporate & Institutional Clients, Member of Private Banking Management Committee, Credit Suisse AG, Zurich Dr Hannes Glaus Attorney-at-Law, President, Swiss Association of Independent Securities Dealers, Zurich Heinz Hofer Managing Director, GE Money Bank, Zurich Heinz Kunz Member of the Executive Board, Zrcher Kantonalbank, Zurich Lucas Metzger Member of the Executive Board, Swiss Bankers Association, Basel Christine Novakovic Head Corporate & Institutional Clients, Wealth Management & Swiss Bank, Group Managing Director, UBS AG, Zurich
Brunello Perucchi Chairman of General Management, Banca Popolare di Sondrio (Suisse) SA, Lugano Pius Ch. Schwegler Chairman of the Executive Board, RBA-Holding AG, Gmligen Alessandro Seralvo Executive Vice President, Cornr Banca SA, Lugano Thomas M. Steinebrunner Attorney-at-Law, Rahn & Bodmer, Thalwil
Office of the Swiss Banks and Securities Dealers Deposit Guarantee Association
Patrick Loeb CEO PO Box 4182, 4002 Basel T +41 61 295 92 92, F +41 61 272 53 82 info@einlagensicherung.ch, www.einlagensicherung.ch Lucas Metzger Deputy CEO
SwissBanking
AGV Banken (Swiss Bank Employers Association) Board

Barend Fruithof Chairman, Managing Director, Credit Suisse AG, Zurich Dr Jrg Gutzwiller Vice Chairman, Member of the Executive Board and Head of Staff, RBA-Holding AG, Gmligen Jean-Luc Besenon Member of the Board of Directors, Banque Cantonale Vaudoise, Lausanne Michael Federer Member of the Board of Directors, Raiffeisen Switzerland, St. Gallen Ren Hoppeler Member of the Executive Board, Zrcher Kantonalbank, Zurich Christoph Huber Managing Director, UBS AG, Zurich Christian G. Machate Head of HR Private Banking, Credit Suisse AG, Zurich
Lucas Metzger Member of the Executive Board, Swiss Bankers Association, Basel Gottlieb Prack Head Human Resources, LGT Bank (Schweiz) AG, Basel Thomas Schenkel Managing Director, Rahn & Bodmer Co., Zurich Pietro Soldini Managing Director, BSI SA, Lugano Andreas Zingg Head Human Resources, Julius Br Gruppe AG, Zurich
Office of the AGV Banken (Swiss Bank Employers Association)

Dr Balz Stckelberger Chief Executive Director Dufourstrasse 49, PO Box 4182, 4002 Basel T + 41 61 295 92 95, F + 41 61 272 93 97 info@agv-banken.ch, www.agv-banken.ch
SwissBanking
Utility Infrastructure Providers, Associations and Federations

Utility Infrastructure Providers for the Swiss Banking Sector
SIX Group AG Office Selnaustrasse 30, 8001 Zurich T +41 58 399 20 91, F +41 58 499 54 55 www.six-group.com SIX Swiss Exchange SIX Securities Services SIX Payment Services SIX Financial Information Chairman CEO Prof. Dr Peter Gomez Dr Urs Regsegger Office Swiss Finance Institute Office Walchestrasse 9, 8006 Zurich T +41 44 254 30 80, F +41 44 254 30 85 info@sfi.ch, www.swissfinanceinstitute.ch Swiss Bankers Prepaid Services AG Office Kramgasse 4, 3506 Grosshchstetten T +41 31 710 11 11, F +41 31 710 12 00 info@swissbankers.ch, www.swissbankers.ch Pfandbriefbank schweizerischer Hypothekarinstitute AG Nansenstrasse 16, PO Box 6446, 8050 Zurich T +41 44 315 44 55, F +41 44 315 44 66 info@pfandbriefbank.ch, www.pfandbriefbank.ch Pfandbriefzentrale der schweizerischen Kantonalbanken AG Office Bahnhofstrasse 9, PO Box, 8050 Zurich T +41 44 292 27 78, F +41 44 292 31 24 www.pfandbriefzentrale.ch Aduno Gruppe Office Hagenholzstrasse 56, 8050 Zurich Oerlikon T +41 58 958 60 00, F +41 58 958 60 01 info@aduno-gruppe.ch, www.aduno-gruppe.ch
Fields of activity
Center for Young Professionals in Banking (CYP) Office Puls 5, Giessereistrasse 18, 8005 Zurich T +41 43 222 53 53, F +41 43 222 53 54 info@cyp.ch, www.cyp.ch
Higher Vocational Education in Banking & Finance (HFBF) Office AKAD Hhere Fachschule Banking und Finance AG Jungholzstrasse 43, 8050 Zurich T +41 44 307 32 47, F +41 44 307 32 07 banking+finance@akad.ch www.akad.ch/banking+finance
SwissBanking
Associations and Federations

Association of Swiss Cantonal Banks Office Wallstrasse 8, PO Box, 4002 Basel T +41 61 206 66 66, F +41 61 206 66 67 vskb@vskb.ch, www.kantonalbank.ch Chairman CEO Prof. Dr Urs Mller Hanspeter Hess Chairman CEO Raiffeisen Group Office Raiffeisenplatz 4, 9001 St. Gallen T +41 71 225 88 88, F +41 71 225 82 51 www.raiffeisen.ch Prof. Dr Johannes Regg-Strm Dr Pierin Vincenz
RBA-Holding AG Office Mattenstrasse 8, 3073 Gmligen T +41 31 660 44 44, F +41 31 660 44 55 info@holding.rba.ch, www.rba-holding.ch Chairman CEO Paul Nyffeler Pius Ch. Schwegler
Swiss Association of Credit Banks and Financing Transactions Office Uraniastrasse 12, PO Box 3228, 8021 Zurich T +41 44 250 43 40, F +41 44 250 43 49 office@gigersimmen.ch, www.vskf.org Chairman CEO Heinz Hofer Dr Robert Simmen
SwissBanking
Association of Swiss Commercial and Investment Banks Office Baarerstrasse 12, 6300 Zug T +41 41 729 15 35, F +41 41 729 15 36 benno.degrandi@vhv-bcg.ch, georg.hess@vhv-bcg.ch www.vhv-bcg.ch Chairman Raymond J. Br Dr Benno Degrandi, Dr Georg Hess Secretary-General
Swiss Private Bankers Association Office 12, rue du Gnral-Dufour, PO Box 5639, 1211 Geneva 11 T +41 22 807 08 04, F +41 22 320 12 89 info@swissprivatebankers.com www.swissprivatebankers.com Chairman CEO Nicolas Pictet Michel Y. Drobert
Association of Foreign Banks in Switzerland Office Usteristrasse 23, 8001 Zurich PO Box 1211, 8021 Zurich T +41 44 224 40 70, F +41 44 221 00 29 info@foreignbanks.ch, www.foreignbanks.ch Chairman CEO Dr Alfredo Gysi Dr Martin Maurer
SwissBanking
Swiss Associations
Swiss Funds Association SFA Office Dufourstrasse 49, PO Box, 4002 Basel T +41 61 278 98 00, F +41 61 278 98 08 office@sfa.ch, www.sfa.ch Chairman CEO Martin Thommen Dr Matthus Den Otter
International Associations
European Banking Federation (EBF) Office 10, rue Montoyer, B-1000 Bruxelles T +32 2 508 37 11, F +32 2 511 23 28 ebf@ebf-fbe.eu, www.ebf-fbe.eu Chairman Christian Clausen Guido Ravoet Chief Executive
Association of Swiss Holding and Finance Companies Office PO Box 4182, 4002 Basel T +41 61 295 93 93, F +41 61 272 53 82 info@holdingverband.ch, www.holdingverband.ch Dr Georg Stucky, former National Councillor, Baar Thomas W. Knell
EFAMAEuropean Fund and Asset Management Association Office 47, rue Montoyer, B-1000 Bruxelles T +32 2 513 39 69, F +32 2 513 26 43 info@efama.org, www.efama.org Chairman Claude Kremer Christian Dargnat Massimo Tosato Peter De Proft Vice Chairmen
Chairman CEO
Association for the History of Finance (Switzerland and the Principality of Liechtenstein) Office 8000 Zurich T +41 44 333 71 92, F +41 44 333 97 96 info@finanzgeschichte.ch www.finanzgeschichte.ch Chairman Fritz Jrg Dr Urs Alfred Mller Dr Jrg Spiller Vice Chairman CEO
Managing Director
Institute of International Bankers (IIB) Office 299, Park Avenue, 17th Floor, USA-New York, NY 10171 T +1 212 421 1611, F +1 212 421 1119 iib@iib.org, www.iib.org
SwissBanking
The Swiss Bankers Association

The Swiss Bankers Association (SBA) is the leading organisation of the Swiss financial centre and represents the interests of the banks and securities dealers vis--vis the authorities in Switzerland and abroad; promotes Switzerlands image as a financial centre throughout the world; fosters open dialogue with a critical public in Switzerland and worldwide; develops the system of self-regulation in consultation with regulatory bodies; supports the training of junior staff and established executives in the banking industry; facilitates the exchange of information and knowledge between banks and bank employees; coordinates joint projects undertaken by the Swiss banks. The SBA was founded in 1912 in Basel and today has a membership of approximately 350 institutions and approximately 18000 individual members. The Associations Office employs a staff of 66. A total of 11 commissions deal with key issues affecting the industry. Serving on these commissions are representatives of various banking groups as well as specialists from the SBA. The SBAs main objective is to safeguard and promote an optimal environment for the Swiss financial services industry at home and abroad. Patrick Odier, Senior Partner at Lombard Odier & Cie, Geneva, has been Chairman of the SBAs Board of Directors since 2009. Claude-Alain Margelisch has been Chief Executive Officer since September 2010.
Imprint Publisher Swiss Bankers Association (SBA), Aeschenplatz 7, PO Box 4182, 4002 Basel T +41 61 295 93 93, F +41 61 272 53 82 office@sba.ch, www.swissbanking.org Concept, design and composition Ramstein Ehinger Associates AG, Branding und Corporate Identity Picture source Schweizerische Bankiervereinigung, Getty Images
This annual report is only published online and is also available in German and French. A detailed report of the years activities is on the website www.swissbanking.org.
SwissBanking
Swiss Bankers Association

Aeschenplatz 7 PO Box 4182 4002 Basel Switzerland T +41 61 295 93 93 F +41 61 272 53 82
office@sba.ch www.swissbanking.org twitter.com/SwissBankingSBA www.facebook.com/SwissBanking www.merci-danke-grazie.ch

Swiss Banking - Annual Report 2012

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Swiss Banking - Annual Report 2012

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SwissBanking

Annual Report 2011/2012

Annual Report 2011/2012

20 100 years of SwissBanking

Dynamism in capital adequacy and liquidity more...

Looking to the next 100 years with confidence more...

Clean money strategy

How banks are aiming to ensure tax compliance more...

Under the watchful eye of the regulators more...

The Swiss Bankers Association

Annual Report 2011/2012

Chairmans Foreword Patrick Odier

the works taking place in the Swiss financial centre.

Tax agreements into extra time

Annual Report 2011/2012

US cross-border and FATCA issue major steps towards our goal

Regulation better coordination needed

Patrick Odier, Chairman

Annual Report 2011/2012

Banking regulation Dynamism in capital adequacy and liquidity

10 Annual Report 2011/2012

Anticyclical capital buffer

The speed and interdependence of regulatory projects have increased considerably.

Too big to fail

12 Annual Report 2011/2012

Real estate and mortgages

Careful navigation is vital

14 14 Annual Report 2011/2012

16 Annual Report 2011/2012

Withholding tax model

International administrative assistance in tax matters

18 Annual Report 2011/2012

Tax crimes in FATF standards

Expansion of due diligence obligations?

20 Annual Report 2011/2012

Sustainability Approaching a trilemma

22 Annual Report 2011/2012

Environmental, social and economic sustainability three target dimensions

Sufficiency, efficiency, or what?

Resolving the trilemma is the challenge of the age

24 Annual Report 2011/2012

An Escher system for the 21st century

26 Annual Report 2011/2012

Shadow banks Under the watchful eye of the regulators

What regulations are planned?

28 Annual Report 2011/2012

What are the main reasons for increased regulation?

30 Annual Report 2011/2012 30

32 Annual Report 2011/2012

Lobbying from the beginning

Thank you and values

34 Annual Report 2011/2012

Swiss core values shape the financial sector

36 Annual Report 2011/2012

Reports from the Commissions

Commission for Law and Compliance

derivative (ETD) transactions and securities lending and borrowing (SLB).

Commission for Financial Market Regulation and Accounting

38 Annual Report 2011/2012

Commission for Swiss Client Business

Commission for Communications and Public Affairs

Commission for Institutional Asset Management (IAM)

40 Annual Report 2011/2012