Switzerland rejected calls for tougher regulation of commodity traders, including Vitol SA, Glencore International Plc and Trafigura Beheer BV, in favor of a voluntary industry code.
“Switzerland generally prefers voluntary standards, which are supported and upheld by businesses, to laws,” Economy Minister Johann Schneider-Ammann told reporters today in the Swiss capital, Bern. “It’s important that we make sure the framework in Switzerland isn’t less attractive than elsewhere.”
The Swiss government started an investigation of the commodities industry in May, saying the Alpine nation was “exposed to risks to its reputation” by being an oil, grain and coffee trading hub. The decision to reject stricter rules will increase Switzerland’s appeal as a commodity-trading center as competition intensifies with Singapore, Dubai and London.
“Switzerland is very cautious that it doesn’t do anything that just might tip the balance and damage an industry that is extremely important,” Ben Knowles, a lawyer at Clyde & Co., said in an interview from Singapore. “Switzerland has had a good run in the past 10 to 15 years, but it’s now facing stiffer competition.”
Switzerland will study the impact of introducing transparency requirements similar to those in the U.S. and the European Union before deciding how to proceed, said Schneider- Ammann, after the government published a report on a commodity-trading industry that contributes 3.5% of Swiss gross domestic product. While the commodities business shouldn’t be “privileged,” the government won’t pursue “sector-specific regulation,” he said.
“Given the international nature of the commodity trading and chartering business, regulations adopted unilaterally by Switzerland would be ineffective,” said Stephane Graber, secretary general of the Geneva Trading and Shipping Association, which represents more than 70 companies in the city. Swiss trading companies “have willingly committed themselves to evolving their corporate governance,” he said.
Commodity trading, concentrated in Geneva and Zug, boosted its share of the Swiss economy 10-fold over the past decade, according to Zurich’s KOF research institute. The trading industry accounts for about 20 billion Swiss francs ($21 billion), according to the State Secretariat for Economic Affairs.