Dealing with Economic and Political Change in Germany and Switzerland
Heading into the second half of 2017, Germans prepare for uncertainty while the Swiss, characteristically, persist with stability. Chancellor Angela Merkel, an advocate of diplomatic relations and globalization, is up for reelection to serve her fourth term. The election of President Trump has had a polarizing effect on German politics, ushering in a rise in popularity for both the Social Democrats and the far-right Alternative for Germany party. In recent years, the country has received an increasingly steady stream of migrants, and it has become an economic leader in the EU – a position that has become more important as the UK prepares to exit the bloc.
Meanwhile, Switzerland’s labor market has rebounded from its unrest in 2015 and is expected to make up any losses by 2018. Gross domestic product (GDP) growth is expected to improve from 2016 to 2017 to 1.8%. Swiss banks appear well capitalized with few problematic loan ratios.
Given their somewhat different economic climates, the key regulatory agencies, Germany’s Federal Financial Supervisory Authority (BaFin) and Switzerland’s Financial Market Supervisory Authority (FINMA), have adopted differentiated regulatory agendas.
Germany’s Federal Financial Supervisory Authority (BaFin) serves as the country’s leading financial regulator, housed within the Federal Ministry of Finance. BaFin is responsible for supervising the most influential financial entities, including banks, insurance providers, securities firms and asset managers. The independent regulator also works closely with the Bundesbank. The agency has put forth an aggressive agenda for 2017, working to preserve a regulatory balance with financial innovation and economic growth in the midst of political change in the EU.
The Financial Market Supervisory Authority (FINMA) is Switzerland’s financial regulatory body, with sovereign authority over the country’s financial system. The agency’s authority extends to the country’s banks, insurance companies, stock exchanges, securities dealers and collective investment schemes. FINMA’s 2017 regulatory agenda looks strikingly similar to last year’s agenda, citing fintech and capital requirements as top priorities.
The Swiss are building on the previous year’s agenda in an attempt to retain the stability that has served them so well. That said, its plans do include bringing further enforcement actions in response to misconduct in the financial services industry. And they have adopted a “pro-innovation” approach towards fintech to facilitate growth in the financial sector.
In contrast, Germany’s regulators and priorities are unsurprisingly politically motivated. In 2016, Germany’s economy saw the fastest growth in five years at 1.9%. This year, the country expects to see roughly 1.5% growth with continued improvements in the job market and exports. It appears that Frankfurt will capture a significant portion of the business leaving London in response to Brexit, especially considering the merger of the London Stock Exchange and Deutsche Boerse.
Both countries’ regulatory strategies will certainly be tested in the coming months.
Download Clutch’s 2017 Financial Services Regulatory Highlights Report now to learn more. In this insightful and informative report, Clutch Group tracks 2017’s key global regulatory developments across the financial services industry to identify major rulemakings, legislative and regulatory implementations, supervisory priorities and enforcement trends.
Stay in the Know
Subscribe to our newsletter for the latest news about legal, risk, and compliance issues.