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The financial sector, and particularly the banking sector, is one of the cornerstones of the Swiss economy. It contributes 9.4% to gross value added. As of year-end 2019, there were 246 banks with 2,552 branches and 6,990 ATMs in Switzerland. In addition, banks in Switzerland dispose of 211 branches abroad.
The sector is very diverse with banks differing in size, business model, ownership structure and regional orientation. They include four major banks, 24 cantonal banks, 43 stock exchange banks, one Raiffeisenbank and 60 regional and savings banks. The rest is split between private banks, foreign controlled banks and foreign branches in Switzerland, among others.
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 having a considerable share of public-sector funding in taxes.
However, the challenges currently faced by banks in Switzerland are in fact manifold: high regulatory costs; shrinking margins; price-sensitive customers; restricted access to foreign markets; rising competition from both financial and non-financial actors and continuing negative interest rates. Overall, Swiss banks are affected by the negative interest rates. Interest rates on banks’ sight deposits at the Swiss National Bank, which exceed an exemption threshold, remain negative at -0.75%. And the end of the low rates’ regime is not in sight due to the upward pressure on the Swiss franc.
Despite considerable headwinds, the Swiss banking sector is in good shape. The stability-related homework is done, service quality meets the highest standards, but profitability needs to be increased. Banks in Switzerland are now primarily focusing on digital innovation in order to develop new business models and to improve internal efficiency and cost structures. Furthermore, the Swiss FinTech landscape has increased significantly, to now over 382 FinTech companies. A third of them are active in the field of Distributed Ledger Technology. In August 2019, the first two blockchain service providers were granted banking and securities dealer licences by the authorities.
Almost half of the CHF 7,893 billion (€7,269 billion) assets currently managed by Swiss banks originated abroad. This is the equivalent to approximately 25% of the market share in global cross-border private wealth management business, making Switzerland the global leader in the field.
The banks’ lending business remains key for the economic development of Switzerland, especially for SMEs which employ around 68% of the labour force in Switzerland. Swiss SMEs that make use of external capital primarily rely on bank financing. Over 90% of the companies that applied for a bank loan received an approval. The total outstanding domestic credit volume in 2019 rose moderately to CHF 1,213 billion (€1,117 billion) of which CHF 1,043 billion (€961 billion) are attributable to domestic mortgage lending.
Clients with 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 amounts to CHF 3,318 billion in 2019 (€3,056 billion). The economic contribution of banks remains high, since banks are important consumers of goods and services.
Switzerland’s economy shows continuous growth and a low unemployment rate. In 2019, real gross domestic product (GDP) grew by 0.9% with moderate growth rates in each quarter. As in the previous year, manufacturing proved to be the biggest growth driver. On the expenditure side, both foreign trade and domestic demand supported growth. Banking services were one of the few sectors with overall negative growth over the last five years. Outsourcing activities and the demand for preliminary goods and services from other sectors, however, lead to orders for companies along the entire upstream value chain. The average unemployment rate for Switzerland in 2019 was 2.3% and, thus, lower than during the previous year.
Alongside the CHF 32.8 billion (€29.1 billion) generated by the Swiss banking sector in 2018, the indirect effects create an additional CHF 13.4 billion (€11.9 billion) of value added to other sectors, leading to a total of 6.9% share of Switzerland’s gross value added.
In 2018, the financial sector paid CHF 17.6 billion (€15.6 billion) in direct and indirect taxes. Approximately 12% of all tax receipts can be attributed to the financial sector (11.5% in 2017).
In 2019, Swiss banks employed 106,084 people (FTE), of which 89,531 were employed in Switzerland. Most of them are employed at one of the four large banks (25%), followed by cantonal banks (20%). The proportion of women employed at Swiss banks stood at 39.8%.
Contributor: Thomas Rühl email@example.com