Strategic background

The Swiss banking market is going through a structural change characterised by digital transformation, tougher competition and financial service providers from outside the industry. At the same time, banks are confronted with their clients' high expectations and strict regulatory requirements.

Clients: High expectations and digital affinity

Developments

Clients expect all-in-one solutions. This has fuelled demand for solutions provided jointly by several service providers. The type of sales channel is secondary, and scepticism about direct banks (online banks without branches, known as "smartphone banks") is declining.

Raiffeisen activities

Raiffeisen continues to rely on a strong physical presence through local Raiffeisen banks. At the same time, Raiffeisen is investing in digital channels and in specific, comprehensive customer care. It recognises the need to address clients' home, wealth and entrepreneurship needs more comprehensively, drawing on the Group's own expertise as well as that of industry outsiders. Raiffeisen's goal is to provide single-source solutions across all its sales channels.

Technology: Increased pace of innovation

Developments

Digital maturity has increased in the banking sector. However, Swiss banks still appear to have some catching up to do compared to other European countries. New technologies relating to blockchain, big data and analytics, biometrics and artificial intelligence are also developing great momentum and affecting banking more and more.

Raiffeisen activities

Raiffeisen has taken an active role in the ongoing digital transformation. It is seizing the opportunities presented by this trend. It not only tests and uses new technologies for efficient process design, it also harnesses them to develop innovative solutions that benefit clients.

Banking market: Tougher competition

Developments

Competition is becoming increasingly cut-throat in the banking market: Innovative outsiders are entering the industry and gaining more and more market share in different business lines. In the mortgage business, insurance companies and pension funds are particularly fond of competitive pricing. The constantly changing offerings, processes and partnerships also influence the value chains of financial service providers and blur the boundaries between industries.

Raiffeisen activities

Competition is becoming increasingly cut-throat in the banking market: Innovative outsiders are entering the industry and gaining more and more market share in different business lines. In the mortgage business, insurance companies and pension funds are particularly fond of competitive pricing. The constantly changing offerings, processes and partnerships also influence the value chains of financial service providers and blur the boundaries between industries.

Economy: Positive performance with sustained low interest rates

Developments

The Swiss economy performed well in 2018. Employment in the labour market has continued to improve. Amid stubbornly low interest rates, the real estate market and mortgage business remained solid, whereby a consolidation of price levels is expected. The investment property market, however, is presenting challenges in some regions. Vacancies have been going up.

Raiffeisen activities

In today's environment, prudent lending practices are essential for a sustainable business trajectory. Raiffeisen has therefore chosen to adhere to its proven, conservative lending policies and cautious market assessments. At the same time, it seeks out and develops new sources of growth and income to offset falling margins in its core business.

Politics: Dynamic changes in regulatory framework

Developments

The adoption of the Paris Agreement and the UN's Sustainable Development Goals have resulted in international sustainability targets that are increasingly being adopted at a national level. For example, one of the Federal Council's reports from 2018 refers specifically to the implementation of the international sustainability agenda. The most striking development at a national level is the amendment of the Swiss Federal Act on Banks and Savings Banks (Banking Act), which in future will allow cooperative banks to raise equity capital.

Raiffeisen activities

Regulatory compliance is a central requirement for Raiffeisen. The amendment of the Banking Act gives Raiffeisen better access to the capital market. In addition, sustainability will attract ever more attention in the future. Raiffeisen acknowledges its responsibility to society and is involved in a wide range of projects in this regard.

Raiffeisen Switzerland: Dealing with the past and renewal

The Raiffeisen Group has gone through an eventful phase since FINMA opened enforcement proceedings and filed criminal charges against Dr Pierin Vincenz, the former Chairman of the Executive Board. Raiffeisen is actively and resolutely dealing with this part of its past.

Proceedings and investigation in the year 2018

The FINMA enforcement proceedings were closed in June 2018. In its investigation, FINMA concluded that Raiffeisen Switzerland severely violated oversight provisions and handled conflicts of interest inadequately. Many of the personnel, organisational and other measures that were ordered have already been implemented or are in the process of being implemented.

The purpose of the independent investigation, which was commissioned by Raiffeisen and opened in April 2018, was to check for irregularities in the equity purchases that Raiffeisen Switzerland and its subsidiaries had made since 2005. The independence of the investigation was assured by making Prof. Dr Bruno Gehrig the lead investigator. Raiffeisen Switzerland published the report in January 2019 and communicated the results transparently.

Future alignment of the Raiffeisen Group

In September 2018, the representatives of the Raiffeisen banks and regional unions decided to reform the Raiffeisen Group within the framework of the "Reform 21" programme. Among other topics, the programme looks at governance, the owner strategy and values. The owners, Raiffeisen banks and the Board of Directors of Raiffeisen Switzerland were participants in the process. The decision to implement the programme laid an important milestone in the modernisation process and sent out a clear signal of the Raiffeisen Group's commitment to reform.

In addition, the delegates of the Raiffeisen banks elected Guy Lachappelle as the Chairman of the Board of Directors of Raiffeisen Switzerland with a clear majority at the Extraordinary Delegate Meeting on 10 November 2018. Karin Valenzano Rossi, Andrej Golob, Thomas A. Müller and Dr Beat Schwab also joined the Board. At the start of 2019, Heinz Huber succeeded Dr Patrik Gisel, who had stepped down as Chairman of the Executive Board in November 2018. In short, these important staffing decisions have set the course for Raiffeisen Switzerland's future trajectory.