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21 December 2017

Financial Times: Switzerland accuses EU of bias in finance dispute

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The EU's equivalence decision on Swiss share trading venues, which is being closely watched in the UK, shows the uncompromising stance Brussels has taken on giving non-EU member states access to its markets if they do not accept the bloc’s regulations or recognise the validity of ECJ judges.

Switzerland’s president on Thursday accused Brussels of “unacceptable” discrimination intended to undermine the country’s role as a financial centre, in a dispute that has implications for Britain’s relationship with the bloc after Brexit.

The accusation came after the EU, which is taking a tough stance towards Switzerland as Brexit negotiations continue, allowed European and Swiss equities traders access to each other's markets for just 12 months from January.

“They want to show to the British, if you are a third [party] state, you have no guarantee of being fairly treated,” said Cenni Najy, senior policy fellow at Foraus, a Swiss foreign policy forum.

Switzerland best regarded as semi-direct democracy Switzerland had expected its stock exchanges to be granted full access to EU markets after it paid €1.1bn in funding to help support the bloc’s poorer member states.

But Brussels has tied talks about granting Switzerland financial market “equivalence” to long-running political negotiations about revamping Bern’s overall relationship with the EU.

The European Commission is putting pressure on Bern to accept its regulations and the role of the European Court of Justice. It also wants to unify a swath of bilateral agreements that allow Switzerland access to the single market, so that the bilateral deals keep pace with changes to European law.

Bern has stalled negotiations on an broad “framework” agreement with Brussels amid growing domestic opposition to ceding sovereignty to “foreign judges”.

Switzerland’s reluctance to agree a deal has in turn sparked frustration in Brussels, pushing the commission to use market access as leverage.

Switzerland fulfils the conditions for recognition of stock market equivalence every bit as much as the other third countries. Switzerland therefore considers this limited recognition to be a clear case of discrimination Doris Leuthard, Switzerland’s president Doris Leuthard, Switzerland’s president, threatened retaliation against Brussels, saying the government reserved the right to delay payments of its promised €1.1bn in EU cohesion funding and abolish stamp duty on its stock exchanges, which would give them a competitive boost.

“Switzerland fulfils the conditions for recognition of stock market equivalence every bit as much as the other third countries that have been granted indefinite recognition,” Ms Leuthard said. “Switzerland therefore considers this limited recognition to be a clear case of discrimination.” [...]

Britain was the only member state that did not back the 12-month agreement, objecting to Brussels’ stance on making market access conditional on progress over the EU-Swiss deal. The commission wants Bern to make headway on institutional talks by the end of 2018, when it will review the equivalency deal.

“This equivalence is limited to one year, and can be extended provided there is sufficient progress on a common institutional framework,” said Valdis Dombrovskis, the commission’s vice-president for financial stability. “We will be assessing progress on that by end of next year.”

The equivalence arrangement will allow stock exchanges in Zurich and Bern to continue trading shares in EU companies for another year from January 4. An agreement recognising the status of Switzerland’s bourses was needed ahead of the introduction of new EU financial rules, known as Mifid II, that come into force next month. The Swiss arrangement is weaker than that Brussels has with Australia, Hong Kong and the US, whose stock exchanges enjoy unlimited access to EU markets. [...]

Full article on Financial Times (subscription required)

European Commission press release: MiFID II: Commission adopts equivalence decision on Swiss share trading venues

© Financial Times

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