Euromoney brought together over 330 issuers, investors and intermediaries in its inaugural Swiss Franc conference, held in Zürich on 29 March. With a strong currency, a well-regulated marketplace and a loyal, if discerning, investor base, participants argued that the country’s bond market had proved itself an invaluable port of call for many borrowers in today’s febrile fixed-income environment. But all of that was set against the background of the continuing debate about the role and regulation of Switzerland’s banks.

Opening the conference, Hans-Ulrich Meister, CEO of Credit Suisse, Switzerland, made an impassioned defence of the country’s financial sector. “There is so much emotion in the system – and I spend 20% of my time in Berne talking to politicians – that we are definitely in danger of making some wrong decisions when it comes to regulatory topics,” he argued.  “In reality almost nobody went better through the crisis than Switzerland.”

Hans-Joerg Rudloff, Chairman of Barclays Capital, argued that the development of Europe-wide capital markets had proved a boon for the continent’s companies and citizens. He pointed out that Switzerland’s long-time role as an exporter of capital has been crucial to that, especially after the late 1980’s opening up once-cosy financial cartels. He argued that limited bank capacity for taking on foreign exchange risk (in terms of currency swaps) continued to provide a ceiling for international use of the Swiss franc market.

Carsten Kengeter, Chairman and CEO of UBS Investment Bank, fired off a warning shot to policymakers and regulators. “Rising risks and growing resource restraints mean that nominal returns are likely to be lower for any given level of risk,” he argued.
“If regulation in one region demands capital well in excess of economic risk the business will have little choice but to move away, or alternatively unnecessary costs will have to be imposed on the real economy.”

Investors’ expectations of a bank’s return on equity have not fallen as fast as regulators may have hoped. With investment banks being according a cost of equity of around 12%, it requires nimble feet to keep investment banking returns competitive, particularly in areas where capital requirements increase by as much as five-fold.
Kengeter pointed out that the Swiss franc market has benefited from the realisation that dependence on just two liquid markets – the dollar and the Euro – carried dangers. But it took the European sovereign debt crisis to change the nature of demand across the bond markets as a whole. “Today the Swiss franc debt capital market is one of the most important debt capital markets in the world, with a significant strategic importance,” said Kengeter. “Its complementary and loyal investor base has meant that the Swiss capital market has increased the choice set.”

Dewet Moser, Deputy Member of the Governing Board and Head of Financial Markets at the Swiss National Bank said that the Swiss franc market still had room for growth. “Market capitalisation of less than Sfr500bn is less than one year of GDP,” he said. “This is certainly sub-par to other markets and is certainly not proportionate to the role of the Swiss financial centre as a whole and is also not proportionate to the role of the Swiss franc in foreign exchange markets.”

With a top quality line up of speakers, this conference provided a unique platform for analysis and debate at just the right time of year.

Many thanks go to all of our sponsors for their support for our inaugural Swiss Franc Forum.

Click here to view the final agenda.