Switzerland’s banking sector: Facts & Figures
Updated September 2018 – For earlier editions of Facts & Figures click here
Switzerland’s economy is in shape with stable economic growth and a comparatively low unemployment rate. In 2017, real gross domestic product (GDP) grew by 1.0%. Growth was broad-based across the various business sectors, with manufacturing, construction and most service sectors, particularly financial services, providing momentum. The average unemployment rate in 2017 was 3.2%.
The financial sector, and particularly the banking sector, is one of the key elements of Switzerland’s economy. Around one in ten value-added francs in Switzerland is generated in the financial sector.
Banks contribute to Switzerland’s international top competitiveness rank by catalysing economic development, offering a large number of skilled jobs, paying above-average salaries and contributing a considerable share of public-sector funding in taxes.
Overall, banks in Switzerland continue to be significantly affected by the negative interest rate environment following the lifting of the 1.20 CHF/EUR floor in early 2015. Interest rates on banks’ sight deposits at the Swiss National Bank, which exceed a fixed exemption threshold, remain negative at -0.75%.
The challenges currently faced by banks in Switzerland, however, are in fact manifold: high regulatory costs; shrinking margins; price-sensitive customers; negative interest rates and rising competition from both financial and non-financial actors. Despite considerable headwinds, the Swiss banking sector is in moderately positive shape with the stability-related homework done.
Banks in Switzerland are primarily focussing on digital innovation and new business models while improving internal efficiency and cost structures as well as strictly following compliance and regulatory requirements.
As of year end 2017, there were 253 banks, 2,683 branches and 7,046 ATM in Switzerland. In addition, banks in Switzerland operate 230 branches abroad.
The 253 banks in Switzerland differ in size, business model, ownership structure and regional orientation. They include four major banks, 24 cantonal banks, 43 stock exchange banks, one Raiffeisenbank and 62 regional and savings banks. The rest are split between private banks, foreign controlled banks and foreign branches in Switzerland, among others.
In terms of trends in payment systems, some of the major banks in Switzerland have developed a digital platform for payment called Twint, which enables cashless payments and person-to-person money transfers via phone numbers in real time. Although the platform was introduced in 2015, it only became the new standard after merging with its major competitor Paymit in 2017.
The total credit utilisation in 2017 was CHF 1,332 billion (approximately €1,222 billion). Liabilities to banks have fallen by more than 50% to CHF 390 billion over the last ten years. Nearly half of the CHF 7,291 billion (approximately €6,689 billion) assets currently managed in Swiss banks originate from abroad. This is equivalent to a 24% market share in global cross-border wealth management business, making Switzerland a global leader in the field.
The banks’ lending business experienced no restrictions during the financial crisis and remains key for the economic development of Switzerland. The total outstanding domestic credit volume in 2017 rose moderately to CHF 1,134 billion of which CHF 974 billion was attributable to domestic mortgage lending.
Despite low interest rates, growth in mortgage loans of 2.7% in 2017 continues to be very moderate compared to previous years. Swiss SMEs employ around 68% of the labour force. SMEs that make use of external capital primarily rely on bank financing. Around 94% of the companies that applied for a bank loan in 2017 received an approval. To date, banks have generally not passed these negative interest rates on to their private customers and downward risks have eased.
Clients at banks and securities dealers that are authorised by the Swiss financial market authority FINMA, are covered by a depositor protection scheme. If a bank or securities dealer is declared bankrupt, deposits up to a maximum of CHF 100,000 per client are secured. This applies to all deposits, including those made at foreign branches.
The aggregate balance sheet of all the banks in Switzerland rose by 4.8% to CHF 3,249 billion in 2017 (approximately €2,981 billion). In 2016, the economic contribution of banks remained high, since banks are important consumers of goods and services. Alongside the CHF 32.0 billion generated by the Swiss banking sector, the indirect effects create an additional CHF 14.0 billion of value added in other sectors, leading to a total of 7.35% share of Switzerland’s gross value added.
In 2016, the financial centre paid CHF 19.8 billion in direct and indirect taxes. This represents about 14.6% of all federal, cantonal and municipal tax receipts. CHF 14.5 billion, i.e. more than 10% of all tax receipts, can be attributed to the banking sector alone.
In 2017, Swiss banks employed 110,413 people, of which 93,555 were employed in Switzerland. Most of them are employed at one of the four large banks (28%), followed by cantonal banks (18%). The proportion of women employed remained virtually unchanged at 39%.
Contributor: Richard Hess Richard.Hess@SBA.CH