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The Swiss banking centre

The banking sector makes a significant contribution to the success of the Swiss financial centre. Switzerland is one of the leading global financial centres and continues to be the top location for cross-border wealth management.

The Swiss banking sector is characterised by a large variety of banking institutions and differing business models. It provides a comprehensive range of services. The digital banking segment in particular is growing steadily. At the end of 2017 there were 253 banks in Switzerland, eight less than the previous year. This reduction pertained only to the foreign banks or their branches. The Swiss National Bank (SNB) breaks the banks in Switzerland down into 8 Groups.

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The banks in Switzerland are operating in a challenging environment, which is currently being impacted by a number of factors. These include rising regulatory costs, a sustained period of negative interest rates, as well as political and legal uncertainties arising from Brexit and international trade tensions. In addition, the ongoing decline in margins and further digitalisation of the finance industry will continue to drive structural realignment in the banking sector in the coming years.

The banks are rising to these challenges and succeeding in their efforts to develop robustly in this changed Environment.

Switzerland requires the best possible, internationally recognised framework conditions in order to ensure that it continues to have a strong and internationally competitive financial market in future.

Bank net income

Aggregate operating net income was CHF 62.5 bn (-0.1 %) in 2017. In the Balance sheets, net income from the interest-earning business accounted for CHF 24.0 bn (-0.6 %), thus making the largest contribution to total net income despite the low interest rate environment. Net income from the commission and services Business increased for the first time since 2013, by CHF 0.8 bn (+4.0 %) to CHF 21.7 bn. The trading business also rose significantly, by CHF 1.6 bn (+25.4 %).

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In 2017, 229 of the 253 banks in Switzerland reported an annual profit. Total annual profit amounted to CHF 10.3 bn. The losses generated by the unprofitable
institutions fell significantly, by CHF 3.3 bn to CHF 0.5 bn (-84.6 %). Overall, the aggregate result for the period (annual profit) across all banks rose by CHF 1.9 bn (+24.0 %) compared to the previous year and now amounts to CHF 9.8 bn. The banks paid CHF 2.2 bn in taxes.

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Since 2009, the share of net income attributable to the big banks has been between 46 and 51 percent, and is therefore substantially higher than the shares of the remaining bank groups. In order to better illustrate the trend for the remaining bank groups, the developments in the share of net income of the big banks is not included in this figure.

Balance sheet business

n 2017, the aggregate balance sheet total of all the banks in Switzerland rose from CHF 3,100.8 bn to CHF 3,249.4 bn (+4.8 %). This is primarily attributable to market developments relating to assets and to the rise in credit volume, which among other factors is a result of expansive monetary policy. At CHF 111.6 bn, the big banks reported the greatest rise compared to the previous year, followed by the cantonal banks (+CHF 22.1 bn), the Raiffeisen banks (+CHF 10.0 bn), the “other banking institutions” (+CHF 3.8 bn) as well as the regional banks and savings banks (+CHF 2.0 bn). The foreign banks (+CHF 1.1 bn) and private bankers (+CHF 0.3 bn) also reported a slight rise. Only the stock exchange banks reported a slight decline in their balance sheet total (-CHF 2.31 bn).

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The banks in Switzerland have been fulfilling their function as lenders and financing partners to the full extent since the introduction of negative interest rates and the lifting of the minimum euro exchange rate.

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Compared to the previous year, the total volume of credit in Switzerland rose by 2.1 percent in 2017. The growth of domestic mortgage loans (+2.68 %) remained almost unchanged compared to the previous year (+2.66 %). Mortgage loans have increased by CHF 309.6 bn (+31.8 %) since 2007 and their share of the domestic credit volume has grown from 78.5 percent to 86.2 percent. Mortgage loans therefore continue to account for the largest share of credit volume.

Wealth management

The banks in Switzerland managed total assets of CHF 7,291.8 bn at the end of 2017. This is the highest level since the financial crisis. The relative share of foreign customer assets was almost unchanged at 48.3 percent. Switzerland remains the global market leader for cross-border private banking: over onequarter (27.5 % market share) of global cross-border assets is managed in Switzerland.

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Institutional customers, both domestic and foreign, had the largest deposits in 2017 (34.8 % and 40.9 % respectively, as a share of total deposits). This was followed by domestic and foreign private investors, who accounted for comparable shares (10.5 % and 8.8 % respectively). Deposits rose both for foreign (+9.9 %) as well as for domestic (+12.5 %) private investors.

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Despite stricter regulatory framework conditions and the low interest rate environment, Switzerland as with assets under management of CHF 2,276.2 bn a market share of 27.5 percent of the global cross-border private banking business. It will remain the global market leader in this segment for the medium term. According to a forecast by The Boston Consulting Group, assets under management in Switzerland will grow by 3 to 4 percent annually until 2021.

Employment in Switzerland’s banks

In 2017, the banks employed 93,554 people in Switzerland (in full-time equivalents). The number of jobs fell by 7,822 (-7.7 %) compared to the previous year. This decline, which at first glance appears substantial, was primarily due to regulatory requirements (specifically, the so-called “Too big to fail” regulations), due to which the big banks were required to adjust their organisational structures, which also resulted in the transfer of employees to intragroup service companies. The staff working for these companies are therefore not included in the banking statistics. If the average change in staff levels at the big banks since 2007 is taken as the baseline, approximately 6,942 jobs can be attributed to this one-off effect. Adjusted for the one-off effect (+6,942), staff levels declined only slightly compared to the previous year (-0.9 % or 880 jobs).

The annual SBA survey on employment trends at the banks shows a slight decline in domestic employment for the first half of 2018. The number of jobs decreased from 86,234 to 86,120 between the end of 2017 and June 2018.

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61.6 percent of survey participants expect employment levels to remain unchanged in the second half of 2018, which corresponds to a decrease of 2.6 percentage points compared to the previous year’s survey. 31.9 percent of survey participants expect staff levels to rise in Switzerland and 6.5 percent expect to see lower levels. This is the highest level of optimism regarding the domestic employment trend seen in a number of years.

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According to SECO, the average unemployment rate in the Swiss banking sector was 2.8 percent in December 2017. It was thus half a percentage point below the figure for the overall economy, which was 3.3 percent, and is comparatively low. Overall, an annual average of 3,999 people was reported as being registered as unemployed in the banking sector in 2017, which corresponds to an increase of 178 compared to 2016. Considering the major, ongoing challenges faced by the banks, the labour market continues to be highly robust.

According to SECO’s monthly statistics, the unemployment rate for the banking sector in the first half of 2018 fell compared to December 2017 and was at 2.3 percent. The unemployment rate was therefore still slightly below the overall average for Switzerland, which was 2.4 percent in June.

In Focus: Asset Management

Asset management, together with private banking, investment banking, and corporate and retail banking, is one of the main pillars of the Swiss financial centre and is of great economic significance. According to recent surveys and estimates, banks, fund management companies, securities dealers and asset managers in Switzerland managed assets of around CHF 3,400 bn at the end of 2017. This corresponds to growth of approximately 13 percent compared to the previous year. In 2017, around 9,600 people were directly employed by asset management firms in Switzerland. Around 44,500 people were indirectly employed in the wider scope of the industry.

For the purposes of this chapter, asset management is defined as ”the production and management of investment solutions in the form of collective investment schemes and individual mandates”. According to this definition, asset management comprises financial services both for institutional investors, e.g. pension funds and insurance companies, as well as non-institutional, private investors with substantial assets managed on a fiduciary basis.

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This role as an intermediary fulfils a central function in the Swiss financial centre. With an efficient capital allocation characterised by rational and meritocratic investment decisions, strong value creation and attractive jobs, asset management makes an important contribution to the efficiency of the market and the stability of the financial system. It is also responsible for the professional management of pension assets, which contributes to general financial stability.

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