The UK and Switzerland – both outside the European Union – are home to large financial centres, albeit in slightly different ways. This commentary from a Zurich-listed law firm explains some of the salient features to a new agreement between London and Berne.

The following article comes from LindemannLaw, a law firm headquartered in Zurich. The comments are republished here with the firm’s permission. The editors are grateful for the opportunity; the usual editorial disclaimers apply. Please contact tom.burroughes@wealthbriefing.com if you wish to jump into the debate.

These amended FAQs offer an overview of the Berne Financial Services Agreement, highlighting its implications for Swiss businesses in the UK. 

1. What is the scope of the Berne Financial Services Agreement between Switzerland and the UK?
The Berne Financial Services Agreement is a globally-unique initiative which opens up the financial sectors of both Switzerland and the UK to each other, focusing on Swiss-UK banking relationship, insurance, asset management, and financial market infrastructures. It is a counter-model to the EU’s approach of harmonisation and unification, emphasising instead mutual recognition of each country’s legal and supervisory framework. This agreement is seen as a significant step in maintaining and strengthening the international competitiveness of the Swiss financial centre and will enhance the UK and Switzerland’s already thriving financial services relationship. It also represents a political milestone post-Brexit, showcasing the UK’s ability to forge new and relevant international trade relationships.

2. What does this mean for you if you are a Swiss relationship manager in a bank?
The agreement allows Swiss financial institutions to offer services to UK clients classified as high net worth individuals and professionals without establishing a significant physical presence in the UK. This arrangement means that Swiss banks can continue to manage relationships with these UK clients, albeit with some limitations in the scope of services they can offer directly. Relationship managers in Swiss banks can thus maintain and cultivate their UK client base, leveraging the agreement’s provisions.

Although the concept of reverse solicitation has not been explicitly addressed in the agreement, it may establish an environment that may lead to a reduction of the reliance on reverse solicitation. Therefore, the Berne Financial Services Agreement allows Swiss banks to maintain and manage their relationships with certain UK clients more effectively, which represents a significant step in facilitating smoother financial services transactions.

3. How does the agreement impact you as a FINMA-regulated EAM or mutual fund manager?
For FINMA-regulated EAMs serving private or institutional clients based in the UK, the Berne Financial Services Agreement offers enhanced opportunities to serve high net worth and professional clients in the UK, including investment advice and portfolio management. The agreement reduces the need for a full-scale physical presence in the UK, lowering operational barriers.

However, it requires strict adherence to both Swiss and UK business regulations, ensuring dual compliance. This facilitates improved client relationship management and growth opportunities in the UK market. The dynamic nature of the agreement also suggests potential for future expansions in areas such as sustainable finance and digital financial services.

Under the new framework established by the Berne Agreement, regulated managers of collective assets will find that their positioning remains largely unchanged. The agreement primarily focuses on servicing professional and wealthy private clients with assets over £2 million ($2.5 million), allowing banks, securities firms, managers of collective assets, fund management companies and asset managers to serve such clients directly and across borders. However, for the field of investment management, which includes mutual funds, the agreement largely confirms the existing status quo. This is because the investment management market already has a very international focus, and the new agreement does not introduce significant changes to this sector.

4. What does it mean for you if you are a FINMA-regulated Swiss Insurance company?
If you are a FINMA-regulated insurance company, the new Berne Agreement between Switzerland and the UK may not significantly alter your current operations. This is primarily because Swiss insurers already have the capability to conduct cross-border business in the UK, provided that their parent companies have a branch in the UK. 

Therefore, the agreement does not introduce a substantial change for Swiss insurance companies in terms of market access or regulatory framework. The primary interest in the agreement was shown more by banks than insurance companies, as the latter already had a degree of access and operational flexibility in the UK market prior to this agreement.

5. How can you benefit from the new arrangement if you are not FINMA-regulated?
Political and trade Implications: The agreement also has broader implications beyond the financial sector. It signifies new foreign trade leeway for the UK post-Brexit, showcasing the country’s ability to engage in international trade agreements independently. This can have indirect benefits for businesses in both countries, enhancing overall market access and economic ties. The arrangement is designed to improve competition and provide more choices for consumers. This aspect can indirectly benefit various businesses and sectors by creating a more dynamic and competitive market environment. 

The agreement allows Swiss companies to operate in the UK under Swiss rules and vice versa, respecting each country’s sovereignty. This provides a certain level of operational ease and certainty for businesses, as they don’t need to dynamically adapt to each other’s regulations.

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6. What are the prospects and additional features of the agreement?
The agreement is dynamic, with provisions for future amendments in areas such as sustainable finance and digital financial services. It signifies a new era of UK international trade relationships post-Brexit and demonstrates Switzerland’s ability to adapt its financial services sector innovatively. The dispute settlement framework within the agreement ensures a structured approach to resolving disagreements, emphasising the long-term view of this collaboration.