Swiss financial centre: much has been achieved but more needs to be done Overview

SIFNEWSLETTER September 2016

I have been the Head of the State Secretariat for International Financial Matters (SIF) since 1 July 2016. I have taken on an organisation from my predecessors which has achieved a great deal for Switzerland in recent years in the area of financial and tax matters.

Important reforms have been implemented or are in the process of implementation in the areas of financial stability, financial market regulation, corporate taxation, money laundering and trans-parency in tax matters, for example. These efforts are already bearing fruit: the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) considers Switzerland to be «largely compliant».

However, there is still room for improvement. In an ideal world, the same rules apply to all financial market participants, Swiss financial market participants have access to foreign markets and a

legal framework which allows innovation exists. Efforts still have to be made in these areas.

We also still have to work on the image of our financial market abroad. The Federal Council has made it clear that it wishes to stake a claim and help improve the reputation of Switzerland‘s financial centre.

Under my leadership, SIF will do everything in its power to ensure that the Swiss financial centre will have the reputation that it deserves. At the same time, I want to contribute to excellent conditions prevailing in the future in this econo- mic sector which is so important for Switzerland so that it can develop its strengths nationally and internationally.

Jörg GasserState Secretary

Global Forum Switzerland clears an important hurdle Page 2 Financial market regulation Regulatory process very high on the reform agenda Page 3 G20 Switzerland taking part in Finance Track Page 4 Agenda Page 5

Contact/editor Communications, State Secretariat for International Financial Matters +41 58 469 79 47 info@sif.admin.ch

News from the State Secretariat for International Financial Matters SIF / Edition 3/2016 / www.sif.admin.ch

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Global Forum

Switzerland clears an important hurdle

In July 2016, the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) published the phase 2 peer review report on Switzerland. The report assessed Switzerland as «largely compliant». This overall rating for Switzerland is positive.

Switzerland has already taken a range of measures and increased transparency.

- In addition, the Global Forum criticised the fact that Switzerland does not currently provide administrative assistance based on stolen data. Parliament will shortly discuss easing this practice: if a foreign country obtained the stolen data via normal administrative assistance channels or from public sources, Switzerland would respond to a corresponding request.

Next stepsA new evaluation round begins for the 135 members of the Global Forum in 2016. The Global Forum will evaluate the implementation of its recommendations, but also new elements like group requests, the identification of the beneficial owners of bearer shares and the quality of administrative assistance requests.

For Switzerland, the next review phase will probably start at the end of 2018. Switzerland will have to examine by then how the recommen-dations of the Global Forum can be implemented.

Yvonne Helble

Based on peer reviews, the Global Forum deter-mines how countries are applying the international standard for the exchange of information on request. The review is broken down into two phases: phase 1 covers the framework for tax administrative assistance in the country concerned; Phase 2 assesses how this is implemented in practice, and the countries are given an overall rating.

Good rating for Switzerland...The good overall evaluation confirms that Switzer-land is complying with the international standards in the area of tax transparency. The Global Forum assessed as positive that Switzerland‘s network of standard-compliant information exchange agreements has been extended. The Global Forum also praised the increase in staffing.

...but there is still room for improvementIn two of the ten overall assessment criteria, Switzerland was considered to be only partially compliant and was given recommendations:

- On the one hand, the Global Forum found that the sanctions in the area of bearer shares were insufficient and this in spite of the fact that

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Financial market regulation

Regulatory process very high on the reform agendaFinancial regulatory reforms have been pursued for several years on a national and international level and are at an advanced stage. With the gradual ebb of this wave of regulation, the focus of the reform efforts has increasingly shifted to transparency and the effectiveness of the regulations, i.e. to the regulatory process as such.

Everybody is talking about buzzwords such as high-quality regulation in the OECD, better regulation in the EU, and bessere Rechtsetzung in Germany. As different as these terms are, they refer to the shared objective of changing the manner in which regulations are prepared and ultimately implemented. In essence, the aim is to increase the efficiency and effectiveness of regula-tions and assess them with economic impact analyses.

Switzerland‘s regulatory process in the financial area was analysed in 2014 by the group of experts for the further development of the financial market strategy. A key implementation measure is extending the regular dialogue between authori-ties, market participants and academia within the framework of a strategic and operationally oriented body (the advisory board for the future of the Swiss financial centre or the financial market policy forum).

The primary aim of this dialogue is to identify the need for regulatory action at an early stage and to include those concerned in an appropriate manner.

Further measures were taken in terms of impact assessments: project outlines to be prepared early on create transparency for those concerned. They should outline the main features of the reform project, present initial thoughts on the anticipated economic impact and show the planned schedule.

Ex post assessments are currently being discussed in order to further improve the regulatory process in the financial market area. These are already provided for in the Banking Act for the too-big-to-fail regime. Such assessments foresee the need to clarify after a certain time whether existing regula-tions have to be adjusted.

Similar developments can be seen in the EU too. The European Commission adopted the better regulation package of reforms in 2015. This contains a discussion on improving the consultative procedure and ensuring the quality of legislation with the establishment of a special Regulatory Scrutiny Board. The EU subsequently identified the inconsistencies in its legislation and intends to review existing legal provisions in an ongoing and systematic manner in the future.

Andrea Zbinden / Frank Schmid

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G20

Switzerland taking part in Finance Track

The Chinese G20 presidency invited Switzerland to participate in the G20 Finance Track in 2016. Switzerland has thus been able to attend the meetings of the G20 finance ministers and central bank governors (three meetings to date), as well as those of vice ministers and all of those regarding the six technical working groups.

Switzerland has been invited to attend some meetings of the G20, the biggest informal forum for international cooperation at the financial and economic level. It is thus internationally recognised as a key player in terms of finance. It had already been invited to participate in the G20 Finance Track in 2013 under the Russian presidency.

Switzerland was strongly implicated during the meetings and within the framework of bilateral exchanges and was able to contribute actively to the discussions under way. For example, one of the G20‘s priorities was correspondent banking activities, and the work in this area within the Financial Stability Board (FSB) was led by Switzer-land. In August 2016, the FSB published a progress report that addresses the decreasing number of relations between correspondent banks (see also SIF-Newsletter 3/2016); a more comprehensive report is expected for the end of 2016.

Moreover, the Federal Department of Finance organised an international workshop last in May 2016 on environmental risk analysis in the financial sector to support the debates of the G20 study group on sustainable development in the area of financial market policy.

Switzerland also managed to defend its views with respect to other dossiers. It insisted on the importance of the commitment of all countries and a level playing field for key financial regulation reforms (e.g. Basel III) and international tax issues.

When it came to G20 priority topics such as economic growth, Switzerland supported the Chinese presidency, which placed structural reforms centre stage. Indeed, the G20‘s theme for 2016 is «towards an innovative, invigorated, interconnected and inclusive world economy».

Finally, Switzerland is pursuing its active commit-ment both within the G20 and beyond that forum in international organisations. Because it does not have a secretariat, the G20 turns to international organisations for developing standards, checking countries‘ commitments and developing and going into more depth on certain economic analyses.

Germany will hold the G20 presidency in 2017 and Argentina in 2018. It still remains to be seen whether Switzerland will continue to participate in the G20 Finance Track.

Sabrina Musumeci

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Agenda

12 to 30 September 2016Federal Assembly autumn session, e.g. with the introduction of the automatic exchange of information with Iceland, Norway, Guernsey, Jersey, the Isle of Man, Japan, Canada and the Republic of Korea as with the tax information exchange agreement with Brazil (National Council)

6 October 2016End of the referendum deadline of the Third series of corporate tax reforms (CTR III)

6 to 7 October 2016G20 finance ministers and central bank governors meeting, Washington, USA

7 to 9 October 2016Annual meeting of IMF and World Bank, Washington, USA

31 October to 3 November 2016Plenary meeting Global Forum, Tbilisi, Georgia

17 to 18 November 2016Plenary meeting Financial Stability Board, London, UK

The SIF

The State Secretariat for International Financial Matters (SIF) defends the interests of Switzerland in international financial and tax matters and partici-pates in international negotiations. The SIF informs yearly in four newsletters about its operations. The newsletters are available in German, in French and in English.

Questions for SIF

Switzerland committed itself to introduce the global OECD standard on the automatic exchange of information (AEOI). When will Switzerland introduce the AEOI?In line with the commitment made by Switzerland at the international level, Swiss financial institutions will start to collect the account data of taxpayers abroad in 2017. The first exchange of data with a wide range of partner states and territories will take place in 2018.

With what countries has Switzerland currently agreed to enable the AEOI?

The State Secretariat for International Financial Matters keeps an updated list of the countries and territories with which Switzerland has concluded agreements on the automatic exchange of information.

With what other countries and territories will Switzerland sign agreements?

Switzerland intends to conclude AEOI agreements with other countries and territories that meet the implementation prerequisites, particularly with respect to confidentiality. Talks are currently under way. In this respect, the Federal Council attaches great importance to ensuring a level playing field among countries, especially among major financial centres. All agreements that are concluded must be approved by the Swiss Parliament.