Punching up (and down)
Hot debates about money - both at home and in parliament - are keeping finances top of mind. The numbers hit home...
Dear Insider,
It is all about the money…as it usually is.
With so many numbers floating around and so much debate about money (in all its forms), there is no wonder that things get heated.
As the Q1 earnings season rolls around and tax season comes along, financial worries - for big and small - are top of mind.
Where are things headed from here?
Quick hits:
💸Personal money matters
While Switzerland is considered a rich country, flowing with watches and wealth, the view from the ground is a bit different. Two recent studies show that ordinary Swiss are greatly worried about their personal finance matters. Of all the topics that keep them awake at night, five of the biggest troubles are related to money - including inflation, pensions and insurance premiums.
🏛 Boxing and bruised
The battle over Credit Suisse continues. In the Swiss parliament this week, a special session saw long sessions (until 1:30 AM on the first day) and dramatic twists and turns. Finance Minister Karin Keller-Sutter received support for her actions from the upper house, but after long, drawn-out debates , legislators in the lower house (led by SVP and SP) said “no”. It came down to the wire…
In the meantime, it has been revealed that Keller-Sutter is no stranger to boxing matches of the political kind. Her favorite sport is kick-boxing. One man who has taken a beating - albeit on the sidelines - is Rainer E. Gut, regarded as the architect of Credit Suisse’s ill-fated foray into investment banking. He has been removed as honorary chairman of the failed bank.
💸Top-up order
PostFinance, one of Switzerland’s largest financial institutions and wholly owned by the government through the Swiss Post, needs to get fit. According to reports this week, the Swiss regulator FINMA has ordered PostFinance to increase its equity ratio by at least CHF 270 million.
💡The Point:
👉 While the gap between the rich and poor in many western countries has widened significantly, the distribution of wealth in Switzerland remains relatively egalitarian, despite the country’s reputation as home to the wealthy. However, with more information flow in the digital age and the generally negative news from the banking sector, including Credit Suisse, the sentiment among the Swiss has turned more negative regarding financial topics. Sitting atop a “mountain of riches” often makes one more worried about the fall…
👉The downfall of Credit Suisse and the bruising internal debate on the topic makes for dramatic political theater. The facts - as outlined in The Swiss Insider last week - show, however, that a big-bank fusion had generally been considered and desired for a long time. The bigger debate now comes about the framing and the pointing of fingers. Obviously, the bank’s troubles required drastic action. But Switzerland’s consensus-focused political system is not set up for quick change and decisive action. Now the political soul of the country may have to adapt to the changing times…
👉 News of FINMA’s belated orders to PostFinance come on top of the regulator’s declaration that its emergency plans, along with those of Zürcher Kantonalbank and Reiffeissen are insufficient. It looks like a case of a toothless oversight body stepping in with “too little, too late”. Hope for a stronger, healthier financial sector and most of all - a sustainable one - may still be years away. Don’t expect overall confidence in Swiss banks to fade away, however…
💡The Insider Advantage:
The big banking trend that has been evident since the 2008 financial crisis comes into clearer focus now: less is more…as in, less risk means more confidence.
Credit Suisse lost its way because of its reckless investment bank. Even the news that its Singapore unit made a splash last year cannot hide the fact that too much risk taking is now definitely out of style.
If FINMA gets its act together and forces the country’s financial institutions to play be stricter rules, expect there to be less credit flowing around. The opportunity then opens up for private banks with big wealthy clients to step in with targeted private equity and venture investment services. Maerki Baumann and Bergos (See The Bonus below) are already starting in this direction.
A renewed opportunity exists for peer-to-peer credit, with advanced digital platforms like Swissquote and PostFinance’s Yuh app - or UBS’s newly rolled out Key4 - taking the lead.
And - as contrarian as it may sound - when the entire ecosystem steps back from risk, and citizens begin to calm down - another generation of daring risk-takers will see their opportunity to stand out…and the cycle may begin all over again.
PROFILE: Elisabeth Kopp - first of her kind
She broke a barrier and left her mark. Switzerland’s first female federal councilor, Elisabeth Kopp has passed away at the age of 86. A legislator from the liberal FDP party, she first gained attention at the local level as township president of Zumikon in Canton Zürich.
After her election to the Federal Council in October 1984 (with a “yes” vote of 124 out of 244), she was responsible for the Justice Department and made great progress on advancing women’s rights.
Her downfall, however, came because of a man. Her husband Hans W. Kopp. As a director in the Turkish trading company Shakarchi Trading AG, Herr Kopp was suspected of having been involved in or having knowledge of massive money-laundering activities. A phone call from Elisabeth to her husband, asking him to step down from the company, was later used by the media to paint her as having been involved in the process.
Nevertheless, her historic contributions to Swiss politics and to the country as a whole were not diminished.
We would love to hear your thoughts…!
➕The Bonus:
🟢Net zero by 2050? - The debate on energy sustainability continues, with new legistation and debate. (Link)
🚀Blast off Bergos - Private Bank Bergos - a Swiss spinoff from a German parent itself - is now looking to support the Swiss startup ecosystem (Link)
🛑No go for pharma - Conditions (the medical kind) can only get better with R&D. But the Swiss system for pharma patents is not so good… (Link)