Flourishing Financially: Corporate Finance In Switzerland
RHEA WESSEL, 02 April 2021
Switzerland is reasserting its reputation as a stable and resilient economy in times of turbulence. While markets elsewhere are concerned about overleveraged companies and ballooning public debt, credit and capital markets in Switzerland appear to be quietly ticking along with the reliability of a proverbial Swiss watch.
It is not for nothing that the country and its currency are considered among the safest of havens. After the Alpine republic and its internationally oriented companies weathered the 2008 global financial crisis, the Swiss National Bank (SNB) tackled the relentless appreciation of the Swiss franc by massively intervening in the currency market, opening Switzerland to accusations of currency manipulation.
But it worked. The SNB’s efforts stemmed the franc’s rise, protecting Swiss companies’ competitiveness and creating favorable funding conditions in the country. Corporate bond spreads hardly budged throughout the financial crisis, a stark contrast to the adverse environment CFOs faced in the eurozone and the US.
When the Covid-19 pandemic hit last year, the funding environment for Swiss companies once again remained stable.
Two fundamental factors explain the resilience of Swiss corporate finance: One is the relatively low leverage of many Swiss companies. Even among exchange-listed Swiss companies, family ownership dominates, preserving a corporate culture with limited appetite for risk.
“Executives act as if they run their own private companies and prefer to focus on operations, not finance,” says Rolf Bachmann, managing director of Lazard’s Switzerland’s office. “Strong balance sheets afford Swiss treasurers more breathing space in tough times like today.”
