If you’re tired of the politicization of banking in Europe and the U.S. and are contemplating a move to Switzerland where taxes are low and living standards are high and everyone loves bankers and earns a handsome amount of money, then be warned: the Swiss are losing their tolerance for highly paid financial services workers along with everyone else.
It started last year with referendums to abolish tax breaks for rich foreigners. In September, Swiss voters in Bern – an expat haven popular with film stars – rejected proposals to abolish the tax breaks, whilst voters in Basel-Landschaft, a less expat-heavy canton, voted to approve them.
Now, Switzerland is going one step further, with proposals to impose new restrictions on executive pay. The Swiss politician Thomas Minder has organised a referendum for March 3rd proposing that shareholders should vote on the remuneration of directors working at Swiss-listed companies. If the move goes through, it will make it easier to restrict the compensation of board members, leading to trickle-down effects for pay lower down. The referendum has been triggered by Swiss discontent with financial services pay in particular. A survey by the Swiss Ethos Foundation found that the average manager of a Swiss financial services firm earns CHF1.9m.
Opinion polls suggest the new rules will come into force: 75% of Swiss voters back them. If they do, they will accompany additional rules regulating Swiss hedge funds, which are expected to come into force in early 2013.
Last year, it emerged that Brevan Howard, a London-based hedge fund which moved its main office to Geneva in 2009 was looking for a significant new space in London again. Stuart McLaren, a partner in the investment management business at Deloitte, said the tide has definitely turned away from Switzerland. “No one is talking to us about move there any more,” he says, “There have been concerns among hedge fund managers that Switzerland doesn’t have all the infrastructure necessary to cope with the influx of hedge fund managers. It can be very difficult to find suitable accommodation for businesses and for individuals, and it’s hard to find schools for children.”
The upside to Switzerland has always been its low taxes and acceptance of wealthy financiers. Stricter hedge fund rules, calls to end tax breaks on foreigners and widespread support for curbs on executive remuneration are eroding that. It’s hard to see financial services professionals moving there for the mountains alone.