Event Milan 15 October 2001

Dr. Urs P. Roth, Chief Executive Officer, Swiss Bankers Association

The Swiss Financial Centre: Tradition and Innovation

Federal Councillor Professor Joseph Deiss,
Your Excellency,
Ladies and Gentlemen,
Dear Guests,
My name is Urs Roth. I'm Chief Executive Officer of the Swiss Bankers Association and I would like to thank you all most sincerely for coming to our Swiss Plus event in Milan today.

First of all, please allow me to say a few words about the outrageous acts of terrorism against the United States that took place on 11 September. Those events shocked us all and showed how vulnerable our open and liberal society is to acts of terrorism carried out by people who have nothing but a complete disregard for human life.

By attacking the World Trade Centre the terrorists tried to strike a blow against one of the world's international financial centres. Like us, I'm sure that members of Milan's financial community are also mourning the loss of friends and professional colleagues caught up in those terrible events.

We started planning this "Swiss Plus" event in Milan over a year ago. In view of all the pain and suffering the terrorist attacks caused, we debated long and hard over whether to go ahead. After much consideration we concluded that we should not give in to violence but make a stand for democracy, freedom and a free economic order. Open and transparent communications are an important step towards this, and that is precisely why we are in Milan today. We want to ensure the continuity of such communication and dialogue, although I must say that in the shadow of the events of 11 September it is difficult to switch over to "business as usual".

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Ladies and Gentlemen,

Milan's pre-eminence in the world of international football is well known. Something I personally was less aware of, however, are the findings of a long-term study by the Financial Times newspaper which showed that two of the three most successful companies in Europe in terms of total shareholder returns are Italian: UniCredito Italiana, based here in Milan, ranked third, and the Rome-based Gruppo Editoriale L'Espresso, was second. On top of this, the Financial Times described Milan as Italy's "engine of… economic growth" and "one of the richest parts of the country and indeed of Europe as a whole". All of which has made Milan a logical destination for a Swiss Plus event. We know the business community we are meeting here is one which understands what we are saying.

I would like to welcome you all most warmly to today's event. It is a pleasure to present to you here in Milan Switzerland's financial centre under the title "Swiss Plus - Financial Excellence: un equilibrio unico tra tradizione e innovazione". Thank you again for taking the time to join us today. I hope that, by the end of the day, you will agree with us that Switzerland is a logical choice for international financial services, that it is well worth considering Switzerland for all types of financial business and that our financial centre can offer you an optimum blend of tradition and innovation.

Let me give you some details of today's programme.

We are honoured to have as our first speaker Professor Joseph Deiss, Switzerland's Foreign Minister. In his speech "The Swiss Financial Centre: Achievements and Challenges", Federal Councillor Deiss will discuss, amongst other things, the international fight against terrorism and also the role of Switzerland's financial centre within Europe.

It is also a great pleasure to present Dr. Heinrich Henckel, Chief Executive Officer of the SWX Swiss Exchange. Dr. Henckel will talk about "European Exchanges, Clearing and Settlement in a Period of Change". With its virt-x trading platform, Switzerland is helping to drive this change.

At the end of the plenary session, the speakers will hold a round-table discussion together with other key figures from the Swiss financial industry. After lunch three workshops will be held where you have the opportunity to discuss certain issues with our specialists in greater detail.

Our "Master of Ceremonies" for the day is Mr. Luca Orlando. Naturally, this well-known face from Television24Ore needs no further introduction from me.

Before I invite Mr. Orlando to take over, please allow me to say a few words about why we launched these overseas events two years ago, to introduce the partners behind "Swiss Plus - Financial Excellence" and to sum up our message.

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International communication and discretion are not a contradiction in terms

Swiss banks are well known for their discretion. Our financial centre has a history-and a very successful history at that- stretching way back to the 18th century, when a number of private banks were set up in Geneva, Basel and Zurich. Today, the banks in Switzerland manage around one-third of private assets invested internationally. Since they achieved this leading position without the help of "roadshows" in the past, you may well ask why are we now embarking on "Swiss Plus", a campaign sponsored by the Swiss Bankers Association, SWX Swiss Exchange, SIS SegaInterSettle AG and the Telekurs Group.

We are convinced that in a world where Information Technology (IT) and telecommunications are making the global village effect more pronounced, even a successful, international financial centre with a long history must put aside its "splendid isolation" if it is not to be forced into the background. The term "global village" is particularly apt for the extremely integrated world of finance. What is important is making existing clients aware of the unimpaired competitiveness of the Swiss financial centre in this new, fast-changing environment and making potential clients aware of our strengths. We can also learn from our dialogue with you. To quote Henry Ford: "If there is any one secret of success, it lies in the ability to get the other person's point of view and see things from that person's angle as well as from your own."

The reasons we are here are the reasons why, in earlier times, merchants travelled to trade fairs. We meet existing clients, hope to attract new ones and use the opportunity to gain an insight into how we can make our services even better. This is something you can surely relate to: as long as two-and-a half-thousand years ago your city-then known as Mediolanum-was a thriving centre for trade at the crossroads between central Europe and the Mediterranean.

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Traditional assets...

First, I would like to summarise Switzerland's well-known advantages as an international financial centre.

...and new strengths

With regard to information technology, we have another "plus" up our sleeve. The Swiss Value Chain, which Dr. Henckel will look at in greater detail, is in my opinion unique in Europe. It covers the three fully-integrated stages of a securities transaction: trading, clearing and settlement, as well as payment. Errors are practically non-existent, the chain is euro-compatible and extremely cost-efficient, thanks in no small part to its complete integration.

Though Switzerland is not part of the European economic and monetary union, the country's traditional and new strengths -- combined with complete euro-compatibility -- are the main messages of Swiss Plus.

The euro and the Swiss franc

This strikes me as a suitable point to say a few words on the relationship between the Swiss franc and the euro.
In two and a half months' time the euro makes its début as cash and will replace the Italian lira and 11 other national currencies in Europe.

As you know, Switzerland, a country surrounded by the eurozone, is staying with the Swiss franc for economic and domestic policy reasons. Switzerland's monetary autonomy can keep interest rates below the rest of Europe, despite a stable exchange rate. Were Switzerland to renounce this autonomy, Swiss monetary policy would be determined by the European Central Bank. This would mean that monetary policy could no longer be specifically tailored to accommodate any particular requirements Switzerland were to have. Just because Switzerland is not part of the European Monetary Union, however, does not mean that the euro has not been the cause of much activity in our country or in its financial centre - quite the contrary.

The euro and its launch as cash are extremely important to Switzerland. It is in our own interests for the European Central Bank to uphold a credible stability policy. We have seen on several occasions how major currency fluctuations can impact smaller currency areas. The fact that the European Central Bank and the Swiss National Bank follow similar monetary policies is good news. There are no indications that this is set to change.

A stable euro protects our Euroland clients against excessive fluctuations in the returns generated by investments in Swiss francs. By excessive I mean difficult to control. Many investors see the Swiss franc as an attractive alternative to the euro, US dollar and other currencies. Including the Swiss franc in portfolios enhances risk diversification. Incidentally, right from the start we have been well equipped to deal with euro transactions: the banks in Switzerland offer euro accounts and, with euroSIC, have an excellent system for euro-denominated payments that can also be used by banks based outside Switzerland.

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Financial privacy protects clients, not banks

I would now like to take a brief look, from the banks' perspective, at one of the much-discussed traditions of our financial centre: the high level of confidentiality that Swiss banks offer their customers.

Before I begin, let me just say that what we are talking about here is not confidentiality with regard to a bank but to its clients. It would therefore be more correct to speak of bank customer confidentiality. To my mind, the terms "financial privacy" and "financial confidentiality" are even more apt.

Bank customer confidentiality safeguards the privacy of domestic and foreign clients. This is one of the tenets on which the Swiss legal system is based. This culture of discretion can be found in other professions and spheres, for example amongst doctors, lawyers and priests.
There is a lot of misunderstanding about this bank customer confidentiality and I would like to stress right away that it offers no protection whatsoever to criminals. The rights to privacy can be suspended by a judge when proceedings are underway into virtually all serious crimes such as money laundering, corruption, insider trading and, of course, terrorism. At a press conference in Bern two weeks ago our Federal Prosecutor left journalists in no doubt about this. "When I'm conducting a criminal prosecution", he said, "financial privacy simply does not exist."

The fight against financial crime has taken on dramatic urgency since September 11th as international financial centres search for signs of terrorist funds. I was initially frustrated when so-called "experts" and professional commentators nonchalantly mentioned Switzerland as the kind of place where terrorists would hide their funds; but I took heart when U.S. officials such as Jimmy Gurulé, the Under Secretary of the Treasury for Enforcement, Michael Chertoff, Assistant Attorney General for the Criminal Division of the Justice Department, and Mercer Reynolds, the US ambassador to Switzerland, acknowledged and praised our anti-crime work and the cooperation we are extending to the United States at the present time.

I would just like to make three points about our pro-privacy, anti-crime policy.

Firstly, Yes, we have a pro-privacy culture, but we believe this is perfectly compatible with the fight against financial crime and terrorism. The Swiss financial system is equipped with a formidable and effective arsenal of legislative and self-regulatory instruments to ensure this. Our banks have highly-developed "know-your-customer" rules which, for example, oblige our banks to dig behind a shell company to establish the true beneficial owner of assets; our banks have due diligence obligations; they are subject to federal laws and Federal Banking Commission Guidelines covering money laundering; they are legally obliged to report suspicions of money laundering or other criminal activity to a special reporting office; they cooperate fully with the authorities; and ultimately, they face severe sanctions if they slip up. President Bush's list of 27 organisations and names linked with terrorism was in all our banks within hours of it arriving in Switzerland and the banks know exactly what to do if they find something.

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Secondly, Switzerland has signed a host of bilateral and multi-lateral treaties governing mutual legal assistance. The European Convention on Mutual Assistance in Criminal Matters has been in force in Switzerland since 1967 and has been supplemented with bilateral treaties with various countries. The Federal Act on International Mutual Assistance in Criminal Matters of 1981 contains a comprehensive regulation of international assistance. International requests for legal assistance in criminal matters arrive through diplomatic channels and are dealt with swiftly and efficiently. No less a body that the Financial Action Task Force on Money Laundering (FATF) has stated in its reports that Switzerland has developed extremely effective measures to fight criminal abuse of its financial system. Many cases of judicial assistance testify to this, and various components of the Swiss system have been adopted by other countries and institutions.

Thirdly, my final point is that our ultimate goal is to protect the private sphere of the honest bank customer - Swiss or foreign - while subjecting criminals to the full force of the law. I believe the system we have developed allows us to do just this.

Summary

Summing up, I would hope that you are convinced by these arguments as to why Switzerland is an attractive, competitive and well-regulated financial centre with comparative advantages and strengths.
You will see

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