Switzerland's Approach to EU Engagement: a Financial Services Perspective

This report examines Switzerland’s past and present political engagement with the EU,

and how this operates for one of its key industries, the financial services sector. The

report will help to inform debate around how the UK engages with the EU, by

considering the experiences of Switzerland as a European country outside the EU, with a

significant financial services industry. Key points to note are:

1) A complex approach to engagement

The Swiss approach is complex, consisting of a set of disparate sector-specific bilateral

agreements developed over time, including on Schengen but excluding financial

services, together with much informal Europeanisation, including autonomous adoption

of EU law.

2) Reliance on London for access to European capital markets

Despite there being no comprehensive services accord, the Swiss financial sector has,

so far, benefitted from largely unfettered access to the EU market, often through its

presence in London. New EU regulations could change this. Tighter regulations would

mean third countries constantly having to amend their parallel legislation, in line with

any changes in Single Market legislation, in order to maintain equivalence over the

course of time.

3) A means of moving closer to the EU

Switzerland’s bilateral approach has been a means of moving closer to the EU rather

than maintaining distance – and around 40% of Swiss legislation derives from EU rules.

4) Access to EU markets

Maintaining Switzerland’s level of access to the Single Market requires continual

closeness to the EU. A Free Trade agreement is not sufficient, especially for the financial

sector. Maintaining access to European capital markets necessitates formal

agreements and parallel legislation to that of the EU.

5) Overall

The Swiss approach is an exception, developed over time, rather than a formal model,

and is a means of closer engagement with the EU. Forgoing complete access to the

Single Market has had implications for the Swiss financial services sector, namely

through the associated necessity of establishing operations in London, and has reduced

Switzerland’s ability to engage in EU policy making.