Switzerland’s banking sector: Facts & Figures
Updated September 2019 – For earlier editions of Facts & Figures click here
Switzerland’s economy shows continuous growth and a low unemployment rate. In 2018, real gross domestic product (GDP) grew by 2.6%. Growth was broad-based across the various business sectors, with manufacturing, construction and most service sectors, particularly financial services, providing momentum. Growth slowed down in the second half. Nevertheless, the pharmaceutical, watch and food producers were again able to increase their exports during the last quarter. The unemployment rate for Switzerland in 2018 was 2.6% and, thus, lower than during the previous year.
The financial sector, and particularly the banking sector, is one of the key elements of the Swiss economy. It contributes around 10% to gross value added. As of year-end 2018, there were 248 banks with 2,615 branches and 7,187 ATMs in Switzerland. In addition, banks in Switzerland dispose of 223 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; rising competition from both financial and non-financial actors and continuing negative interest rates. Overall, Swiss banks remain affected by the negative interest rates. Interest rates on banks’ sight deposits at the Swiss National Bank, which exceed a fixed exemption threshold, remain negative at -0.75%. An 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 a moderately positive 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 330 FinTech companies. More than a third of them are active in the field of Distributed Ledger Technology. The Swiss crowdlending market has grown by 40% in 2018.
The banks’ lending business remains key for the economic development of Switzerland, especially for SME which employ around 68% of the labour force in Switzerland. Swiss SMEs that make use of external capital primarily rely on bank financing. In general, over 90% of the companies that apply for a bank loan in 2017 receive an approval. The total outstanding domestic credit volume in 2018 rose moderately to CHF 1,174 billion (€1,041 billion) of which CHF 1,010 billion (€896 billion) are attributable to domestic mortgage lending.
Clients at banks and securities dealers who 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.
Almost half of the CHF 6,943 billion (€6,161 billion) assets currently managed by Swiss banks originated abroad. This is equivalent to approximately 27% market share in global cross-border private wealth management business, making Switzerland the global leader in the field.
The aggregate balance sheet of all the banks in Switzerland amounts to CHF 3,225 billion in 2018 (€2,861 billion). The economic contribution of banks remains high, since banks are important consumers of goods and services. Alongside the CHF 31.0 billion (€27.5 billion) generated by the Swiss banking sector in 2017, the indirect effects create an additional CHF 17.0 billion (€15 billion) of value added in other sectors, leading to a total of 7.4% share of Switzerland’s gross value added.
In 2017, the financial sector paid CHF 19.3 billion (€17.1 billion) in direct and indirect taxes. Approximately 11.5% of all tax receipts can be attributed to the financial sector (10.7% in 2016).
In 2018, Swiss banks employed 107,388 people (FTE), of which 90,660 were employed in Switzerland. Most of them are employed at one of the four large banks (27%), followed by cantonal banks (19%). The proportion of women employed at Swiss banks stood at 39.5%.
Contributor: Richard Hess Richard.Hess@SBA.CH