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Switzerland’s banking sector: Facts & Figures

Banks contribute to Switzerland’s international competitiveness:

  • As centres of innovation and training sites, banks catalyse economic development.
  • As taxpayers, they contribute a considerable share of public-sector funding.
  • As employers, banks offer a large number of skilled jobs paying above-average salaries and Swiss banks are major investors in supporting youth employment providing apprenticeships to nearly 3,500 training positions. This corresponds to 11.6% of all commercial apprenticeship training positions in Switzerland.

In 2015, banks generated CHF 32 billion in direct gross value added. However, as important consumers of goods and services the indirect effects of bank activity generated an additional CHF 14.0 billion of value added in other sectors, leading to a total direct and indirect share of 7.35% of Switzerland’s gross value added. The financial centre paid CHF 19.8 billion in direct and indirect taxes in 2015. This represented about 14.6% of all federal, cantonal and municipal tax receipts. CHF 14.4 billion, i.e. more than 10% of all tax receipts, can be attributed to the banking sector alone.

The challenges currently faced by banks in Switzerland, however, are manifold: Rising regulatory costs, shrinking margins, price-sensitive customers, negative interest rates, job cuts and investments in financial technology. Despite considerable headwinds, the Swiss banking sector is in moderately positive shape with the stability-related homework done. Banks are now turning their attention to increasing efficiency and profitability by adapting their business models to the possibilities the technological solutions of tomorrow are providing.

As of year-end 2016, there were 261 banks, 3,000 branches and 7,019 ATM in Switzerland. In addition, banks in Switzerland operated 233 branches abroad.

The aggregate balance sheet of all the banks in Switzerland rose by 2.5% to CHF 3,100.8 billion in 2016 (€2,844.5 billion). The total credit utilisation was CHF 1,277 billion (€ 1,171.5 billion). Liabilities to banks have fallen by more than 50% to CHF 352.6 billion over the last 10 years. Nearly half of the CHF 6,651 billion (€ 6,102 billion) assets currently managed in Swiss banks originate from abroad. This is equivalent to a 25% market share in global cross-border wealth management business, making Switzerland a global leader in the field.

In 2016, 120,843 people work for the banking sector (in full-time equivalent).

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 rose moderately in 2016 to CHF 1,108.8 billion of which CHF 947.0 billion was attributable to domestic mortgage lending. Despite the negative rates, the growth in mortgage loans of 2.7% in 2016 was the most moderate increase in many years. Swiss SMEs employ 68% of the labour force in 2016. SMEs that make use of external capital primarily rely on bank financing. Some 94% of the companies which were dependent on a bank loan in 2016 received an approval. To date, banks have generally not passed negative interest rates on to their private customers.

Over the past year, the Swiss big banks improved their capital situation further, as regards both risk-weighted capital ratios and leverage ratios. Both big banks are almost fully compliant with the look-through requirements of the current Swiss ‘too big to fail’ regulations (TBTF1) and the international Basel III capital framework.

In 2016, banks in Switzerland continued to be significantly impacted 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 stabilisation of interest rate margins and profit retention has helped to ensure that domestically focused banks’ resilience remains adequate. Their available capital increased significantly faster than their risk-weighted asset. Moreover, their leverage ratios remain high by historical standards. Second, stress test results suggest that most banks’ capital surpluses, relative to the regulatory minimum requirements, are large enough to absorb the losses related to relevant adverse scenarios.

The banking sector is currently undergoing a process of industrialisation with the break-up of the value chain. Ensuring that Switzerland remains a leading global financial centre will require top framework conditions for financial technology and first-class infrastructure. The Federal Council called for a reduction of regulatory barriers to market entry for providers in the financial technology (Fintech) area and increased legal certainty for the sector overall.

Switzerland’s payment system is currently adapting to the technological developments. After its merger with its competitor Paymit, Twint appears to have emerged as the standard digital wallet and was rolled out earlier this year. The integration of E-invoicing and accounting are currently being mainstreamed for SMEs.

The Federal Council adopted the dispatch on the Financial Services Act (FinSA) and on the Financial Institutions Act (FinIA) at the start of November 2015. The FinSA and FinIA will create uniform competitive conditions for financial intermediaries and improve client protection. Both laws should enter into force in 2018. In its financial market strategy of October 2016, the Swiss government aims to increase competitiveness by optimising regulatory content and processes and using existing national regulatory leeway, while still focusing on internationally recognized standards. Furthermore, Switzerland introduced a Fintech-license and the license-free sandbox. Both regulations encourage suppliers of innovative financial technologies and take into account the dynamics of the financial world.

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