Unlocking EU investments through ISPA

Our proposed Institution-Specific Approach (ISPA) for the provision of cross-border financial services would offer a harmonised framework at EU level for Swiss financial institutions to contribute to the EU capital markets based on an EU license. Swiss banks manage approximately €1 trillion in assets from EU-domiciled clients1 that could play an important role in financing the EU’s strategic objectives. Through integrated supervision at EU level and compliance with relevant EU law by Swiss financial institutions making use of this framework, ISPA would ensure cross-border servicing of EU clients that upholds the core principles of the single market and safeguards financial stability. It would further guarantee a level playing field and fair competition, while offering high-quality services and a wide range of products for clients domiciled in the EU. It would essentially act as an opt-in proposition for the Savings and Investment Union (SIU).

Supporting Europe’s investment needs

The Swiss Finance Council and its members are deeply committed to the EU’s goal of building a framework that enables the attraction of external investments under the SIU. This initiative is essential for Europe’s long-term competitiveness and for financing its green and digital transition. The proposed ISPA was designed to mobilise external capital for Europe’s strategic priorities and help close the investment gap identified in Mario Draghi’s report, by enabling Switzerland, an economy with robust regulatory standards and shared European values, to channel investments into the EU. Removing the barriers to the cross-border provision of financial services is expected to increase the liquidity and depth of the EU capital markets, improve access to a broad range of high-quality financial services for European citizens and businesses, and allow the EU to attract the external capital it needs to help finance its sustainability and digital transition.

Advantages for the EU and Switzerland

Economic benefits

Building on the existing volume of EU client assets managed by Swiss banks, Switzerland is well positioned to actively channel EU citizens’ private wealth booked in Switzerland into European projects. However, this potential largely remains untapped due to restrictions under the current regulatory regime on active servicing of EU clients and hence clients do not benefit from the full range of investment know-how and capabilities. ISPA would eliminate the remaining barriers to the cross-border provision of financial services between the EU and Switzerland, unlocking new investment opportunities for the EU by activating assets from existing EU clients in Switzerland.

Harmonised third-country regime and strengthening the Single Rulebook

The ISPA with integrated supervision at EU level would create a single point of entry into the EU market for Swiss financial institutions providing cross-border services into the EU.
The approach would constitute an ideal solution for the EU to experience a controlled market opening to a closely connected third country with high regulatory and supervisory standards. It would replace the current array of market access provisions, which vary across the types of institutions, services and client categories, and are inconsistently interpreted by different national competent authorities.

Enhanced transparency

The EU’s oversight of Swiss financial institutions’ cross-border activities would increase transparency in relation to EU-domiciled clients’ business and improve compliance oversight and information sharing.

Level playing field & financial stability

By subjecting all participating Swiss financial institutions to relevant EU regulatory standards and supervision when servicing EU-domiciled clients, this approach would ensure a level playing field and safeguard financial stability. Future changes to the relevant EU regulatory standards would be applied by Swiss financial institutions providing cross-border services under ISPA.

Removing barriers is not only expected to increase EU investments, but also to positively impact overall EU economic growth by increasing market efficiency and reducing the cost of capital and improving access for European citizens and businesses to a broader range of services and products.

Enhanced competitiveness and market integration

Providing Swiss financial institutions with direct access to EU-domiciled clients would stimulate innovation and competition, and meet the demand for diverse investment offerings and high-quality services. Consequently, this would bolster the competitiveness, diversity and liquidity of EU capital markets. Swiss financial institutions have extensive expertise in sustainable and impact investing and hence can contribute to broader SIU objectives. Overall, the further integration of EU and Swiss capital markets would strengthen the international competitiveness of European capital markets.

Reciprocity

Given the already existing openness of the Swiss market for cross-border financial services from abroad, this approach would facilitate reciprocal access to financial services between the EU and Switzerland, thereby contributing to the strengthening of the broader bilateral relationship between the EU and Switzerland.

Key features

Institutional compliance mechanism

ISPA shifts the responsibility of implementing EU law from the third-country level to the level of the financial institution seeking to provide cross-border services to EU-domiciled clients. This means that Swiss financial institutions, when operating under this framework, would be directly accountable for complying with relevant EU regulations (e.g. conduct rules).

Scope of services and clients

The scope and access would extend to all client categories (i.e., retail and professional investors, and eligible counterparties) and would cover provision of services to both existing and new clients domiciled in the EU. It would encompass a broad scope of financial services and activities, including banking, investment and payment services as well as asset management services and products, and digital assets, to maximise its relevance.

Governance & supervision

The proposal suggests that interested Swiss financial institutions should register with a central EU supervisory authority, granting them a license to provide financial services on a cross-border basis throughout the EU.
The approach would be supported by safeguarding measures (e.g., provision of information on the institutions’ cross-border business activities and scope of their cross-border operations from Switzerland into the EU) and supervisory cooperation between EU and Swiss authorities (on supervisory aspects such as information exchange, on-site inspections, and mutual recognition of enforcement measures).

Implementation

Our proposal recognises three distinct pathways for implementing ISPA: through either a regulation establishing the framework and its interaction with existing EU sectoral legislation, a standalone bilateral agreement or a combination of both.

Building upon existing concepts

We acknowledge the importance and value of leveraging existing concepts to ensure continuity and coherence. Within various EU financial market third-country regimes, we identify elements of ISPA that serve as sources of inspiration for further development. Here, we highlight a few illustrative aspects:

• For instance, under EMIR, third-country CCPs undergo a rigorous recognition process by ESMA, ensuring compliance with EMIR requirements such as risk management and governance. Once recognised, third-country CCPs become subject to ongoing supervision by both their home supervisory authority and ESMA.
• Under the MiFIR equivalence framework for third-country credit institutions and investment firms regarding investment services for professional clients and eligible counterparties (which has not been activated), third-country institutions are required to register with ESMA. Additionally, this framework necessitates the establishment of a cooperation agreement between ESMA and the relevant third-country authority.
• In AIFMD, the third-country passporting regime (that has not been activated) mandates compliance with the AIFMD for non-EU AIFMs managing EU AIFs and/or market EU AIFs managed by them.

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