Swiss regional banks, or Kantonalbanken, are increasingly expanding beyond their traditional cantonal borders, with the Lucerne Cantonal Bank positioning itself as an alternative to major Swiss universal banks in German-speaking regions. The push for growth, however, carries risks, as demonstrated by Radicant, a sustainability-focused subsidiary of the Basel Cantonal Bank, which was launched with high expectations before entering liquidation.
Expansion should not be pursued as an end in itself, according to Reto Jauch, a headhunter and banking expert, who emphasizes the need for the right competencies and governance in a recent podcast interview. 'Growth for growth’s sake is the wrong approach,' Jauch states. While stagnation is not an option either, regional banks must redefine progress beyond mere volume growth, as factors like interest rates, geopolitics, technology, and competition increasingly transcend cantonal boundaries.
Jauch highlights the critical role of governance in expansion strategies, stressing that the supervisory board bears ultimate responsibility for approving and overseeing such initiatives. He advocates for predefined thresholds and exit scenarios at the outset, warning that the longer a strategy is pursued, the harder it becomes to abandon. 'The longer you’re on the path, the harder it is to pull the plug,' he notes, cautioning against doubling down on failing strategies by injecting additional capital or management resources.
As banks expand into new markets or adopt technology-driven models, the composition of the supervisory board must evolve accordingly. Jauch argues that a traditional bank board may lack the necessary expertise for such ventures. 'You can’t pursue a new expansion strategy with a traditional bank board without supplementing it,' he says, emphasizing the need for systematic skill-building aligned with the company’s strategic direction.
The supervisory board should serve as a counterbalance to the executive team, Jauch adds. While management drives strategy and initiatives with energy, the board must provide sober oversight, critically assess risks, and embed exit scenarios. Its role is not to dampen enthusiasm but to channel it appropriately, particularly when venturing beyond established markets where brand recognition and trust are weaker. Jauch expects more Kantonalbanken to expand across cantonal borders in the future, particularly through digital models, noting that 'digital knows no boundaries.'
