12 Jun 2020

The Swiss financial center has a thermometer function for Europe

In a SAFE webinar, financial historian Tobias Straumann talks about the international significance of the Swiss financial center in times of crises

Throughout the political and economical history, Switzerland has always taken a neutral position and, thus, played a special role in Europe. However, according to Tobias Straumann, financial historian at the University of Zurich, Swiss’ financial history completes the picture of the European financial history by emulating the developments in Europe's financial markets or by displaying opposing trends. In a webinar organized by SAFE, the Institute for Banking and Financial History, the Society for Social and Economic History (Gesellschaft für Sozial- und Wirtschaftsgeschichte), and the German Economic Association (Verein für Socialpolitik), he explained the importance of financial data from the Swiss financial market in an international context.

Despite the special role Switzerland takes in international political and economical events, financial crises have a direct impact on the Swiss financial market. According to Straumann, this is due to the pronounced internationalization of Swiss banks and insurance companies. This can indirectly lead to further crises in the country. In particular, these secondary crises have a certain international "thermometer function" and can be explained by the foreign flight capital. Especially in times of crisis, Switzerland is still rated as a "safe haven", the expert explained.

For example, this became apparent after the financial crisis 2008/ 2009. While the economic distortions were directly transferred to Switzerland through the necessary stabilization of the directly affected UBS bank, two secondary crises occurred. First, the importance of the Switzerland in asset management drastically declined following the abolition of banking secrecy for foreign clients in February 2009. Second, Switzerland had to cope with a revaluation shock of its own currency in summer 2011. According to Straumann, the development of the Swiss Franc shows the "temperature curve" of the euro crisis.

However, especially in times of crises, short-term capital movements to Switzerland can be seen: "Banks are not innovative, but they have this placing power," Straumann explained the capital flows. While major financial centers such as London would also generate innovations in the markets, Zurich would continue to benefit from the large assets managed in Switzerland since the end of the First World War, which the banks in turn can use for the capital market business, Straumann said.

Watch the Webinar on Youtube