Economy and Banking Sector of Switzerland

Switzerland is a stable, peaceful and prosperous country, with modern market economy having low unemployment and highly skilled labor force.

Among the main sectors of Swiss economy are production of chemicals, watches, textiles, machinery, and also tourism, banking, and insurance.

Swiss neutrality and national sovereignty have fostered a stable environment where the banking sector was able to develop.

Location Central Europe
Population (2014)8 136 689 ↑ (+0.01%)
EU Status not a member


Economy
National Currency CHF (Swiss franc)
    Exchange Rate (2015-02-27) 1 EUR = 1.0636 CHF
GDP 
    Nominal GDP (2013)490.0 bln EUR ↓ (0.00%)
    Nominal GDP per Capita (2013)61 100 EUR ↓ (-0.01%)
    Real GDP Growth (2013)2.0 % ↑ (2012: 1.0 %)
Inflation Rate 
    CPI, MoM (Jan 2015)-0.6 % ↓ (Dec 2014: 0.0 %)
    CPI, YoY (Jan 2015)-0.1 % no change(unchanged)
    CPI, Year Average (2014)0.0 % ↓ (2013: 0.1 %)
Unemployment Rate (2013)3.2 % ↑ (2012: 2.9 %)
Credit Ratings (as of Nov 2014)
    Fitch AAAhighest credit quality, outlook stable
    Moody's Aaaprime, outlook stable
    S&P AAAprime
Taxation
Withholding Tax 0.0 - 35.0%
Double Taxation Agreements 101 signed agreements
Information Exchange 
    Exchange on Request 6 signed agreements
    Automatic Exchange starts in September 2018
Banking Sector
Financial Market Development 5.300 (max 7.000)rank: 11th out of 144 countries
    Banks' Soundness 5.900 (max 7.000) rank: 21st out of 144 countries
Banking Industry Country Risk 1(1 - lowest risk, 10 - highest risk)
    Economy Risk 1
    Industry Risk 2
Deposit Guarantee Scheme 
    Maximum Protected Amount 100 000 CHF
Country Ceiling for Deposits 
    Local Currency (CHF) Aaaprime
    Foreign Currency Aaaprime
Banking Sector Structure 
    Number of Banks288
    Recent Changes (2013) new banks: 1, closed banks: 15
    Consolidated Assets (2013) 2 321 bln EUR ↑ (+0.06%)

Major Banks
 UBS AG  HSBC Private Bank (Suisse) SA
 Credit Suisse AG  Bank Julius Bär & Co. AG
 Raiffeisen Group  Mortgage bond bank of the Swiss mortgage institutions
 Zürcher Kantonalbank
List of Banks in Switzerland

Swiss Economy

National Currency

Durung the last 10 years EURCHF exchange rate was within the range 1.0468 - 1.6762, reaching its maximum in Oct 2007 and falling to its minimum in Jan 2015.

Euro to Swiss franc (EURCHF)
Chart 1. Euro to Swiss franc (EURCHF). Source: ECB.

GDP

According to Eurostat, nominal GDP of Switzerland in 2013 was 490.0 bln EUR.

Switzerland outperforms the European Union in terms of real GDP growth with the average annual differential coming to 0.3% over the past 10 years (2003 - 2013). In 2013 real GDP growth was 2.0% which was above the Euro Area average (-0.5%) and above the European Union average (0.1%). Real GDP growth in 2014 - 2019 are IMF's estimates.

Real GDP Growth in Switzerland
Chart 2. Real GDP Growth in Switzerland. Source: Eurostat, IMF.

Switzerland has an above-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, exceeded that of the European Union by 8.84% over the past 10 years (2003 - 2013). In 2013, nominal GDP per capita in Switzerland was 61 100 EUR.

GDP per capita at PPP in 2014 - 2019 are IMF's estimates.

GDP Per Capita at Purchasing Power Parity in  Switzerland; European Union = 100
Chart 3. GDP Per Capita at Purchasing Power Parity in Switzerland; European Union = 100. Source: Eurostat, IMF.

Inflation Rate

According to Eurostat, inflation rate in Switzerland in 2014 expressed as annual percentages of average consumer prices was 0.0% which was below the Euro Area average (0.4%) and below the European Union average (0.6%). Inflation rates in 2015 - 2019 are IMF's estimates.

Inflation Rate in Switzerland
Chart 4. Inflation Rate in Switzerland. Source: Eurostat, IMF.

Taxation in Switzerland

Withholding Tax

Withholding taxes are imposed at source of income and are often applied to dividends, interest, royalties, rent and similar payments. The rates of withholding tax are often reduced by double taxation agreements.

Withholding tax rates applied on payments of interest and dividends in Switzerland are shown in Table 1.

DividendsInterest
Natural person, resident35.035.0
Natural person, non-resident35.035.0
Table 1. Withholding tax rates in Switzerland.

Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

Switzerland signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 1 January 2013 the date of coming into force is given in brackets):

 Albania Algeria Antigua and Barbuda
 Armenia Australia Austria
 Azerbaijan Bangladesh Barbados
 Belarus Belgium British Virgin Islands
 Bulgaria (Oct 2013) Canada Chile
 China Colombia Cote D'Ivoire
 Croatia Czech Republic Denmark
 Dominica Ecuador Egypt
 Estonia Faroe Islands Finland
 France Georgia Germany
 Ghana Greece Grenada
 Hong Kong Hungary Iceland
 India Indonesia Iran, Islamic Republic of
 Ireland Israel Italy
 Jamaica Japan Kazakhstan
 Korea, Republic of Kuwait Kyrgyzstan
 Latvia Liechtenstein Lithuania
 Luxembourg Macedonia Malaysia
 Malta Mexico Moldova, Republic of
 Mongolia Montenegro Montserrat
 Morocco Netherlands New Zealand
 Norway Pakistan Peru (Mar 2014)
 Philippines Poland Portugal
 Qatar Romania Russian Federation
 Saint Kitts and Nevis Saint Lucia Serbia
 Singapore Slovakia Slovenia
 South Africa Spain Sri Lanka
 Sweden Tajikistan Thailand
 Trinidad and Tobago Tunisia Turkey
 Turkmenistan (Dec 2013) Ukraine United Arab Emirates
 United Kingdom United States Uruguay
 Uzbekistan Venezuela Vietnam

There are also several agreements between Switzerland and other jurisdictions which was signed but haven't yet come into force (for agreements signed after after 1 January 2013 of signing the agreement is given in brackets):

 Argentina (Mar 2014) Australia (Jul 2013) China (Sep 2013)
 Hungary (Sep 2013)

Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Spontaneous exchange of information is provision of information that is forseeably relevant to another party without a request being previously sent.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

There are also several agreements between Switzerland and other jurisdictions which was signed but haven't yet come into force (for agreements signed after 1 January 2013 of signing the agreement is given in brackets):

 Andorra (Mar 2014) Guernsey (Sep 2013) Isle of Man (Aug 2013)
 Jersey (Sep 2013) San Marino (May 2014) Seychelles (May 2014)

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Switzerland didn't sign the automatic information exchange agreement but made a commitment to start the automatic information exchange in September 2018.

Further Information:
Automatic Exchange of Information on Financial Accounts
Countries Which Will Not Automatically Exchange Account Information

Swiss Banking Sector

Financial Market Development

According to World Economic Forum's Global Competitiveness Report 2014-2015, financial market development in Switzerland is scored 5.300 out of maximum 7.000 and ranked 11th out of 144 analysed economies. Soundness of banks is scored 5.900 bringing Switzerland into the 21st place, trustworthiness and confidence of financial market is scored 5.700 (11th place).

Financial Market Development in Switzerland
Chart 5. Financial Market Development in Switzerland. Source: WEF.

Banking Industry Country Risk

Banking Industry Country Risk Assessment (BICRA) is a methodology designed by Standard&Poor's "to evaluate and compare global banking systems". A BICRA is scored on a scale from 1 to 10, ranging from the lowest-risk banking systems (group 1) to the highest-risk (group 10). The BICRA methodology has two main analytical components: "economic risk" and "industry risk". Each of the components is then further divided into 3 "factors" that result in an economic and industry risk score for each country.

Switzerland is included into group '1' with economic risk scored '1' and industry risk scored '2'.

BICRA group1
Economic risk1
    Economic resiliencevery low
    Economic imbalancesvery low
    Credit risk in the economylow
Industry risk2
    Institutional frameworklow
    Competitive dynamicslow
    Systemwide fundingvery low
Government support assessmentsupportive
Table 2. BICRA for Switzerland. Source: S&P's.

Deposit Guarantee Scheme

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Switzerland are summarised in Table 3.

Scheme Participantsall credit institutions operating in Switzerland (including branches of foreign banks), branches of Swiss banks abroad
Eligible Depositorsprivate individuals, commercial enterprises and public-sector offices
Covered Accountscredit balances (e.g. personal accounts, savings accounts, investment accounts, salary accounts, numbered accounts, deposit accounts and current accounts)
Covered Currenciesall
Maximum Protected Amount100 000 CHF
Paid In CurrencyCHF
Table 3. Deposit guarantee scheme in Switzerland.

Further Information: Deposit Guarantee Schemes in Europe

Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Local currency (Swiss franc) deposit ceiling for Switzerland is set to Aaa (prime), foreign currency deposit ceiling is Aaa (prime).

Banking Sector Structure

Currently there are 288 credit institutions operating in Switzerland.

Recent structural changes (2011 - 2013) of the banking sector of Switzerland are summarised in Table 4.

201120122013
Number of Opened Banks221
Number of Closed Banks01715
Table 4. Recent structural changes in the banking sector of Switzerland.

All the credit institutions operating in Switzerland can be classified into several categories. Table 5 summarises the number of banks in each category.

CategoryNumber of Banks
Big banks2
Branches of foreign banks27
Cantonal banks24
Central banks1
Institutions with a special field of business6
Other banks / Banks that specialise in stock exchange, securities and asset management business47
Other banks / Foreign-controlled banks91
Other banks / Other banking institutions14
Private bankers / Private bankers who do not actively seek deposits from the public11
Raiffeisen banks1
Regional banks and savings banks / Other regional banks and savings banks27
Regional banks and savings banks / RBA Holding banks37
Table 5. Number of banks by category in Switzerland.

The list of the most recently opened banks in Switzerland is provided in Table 6.

NameStart Date
 PostFinance AGJanuary 2013
 Aquila & Co. AGJanuary 2012
 Quilvest (Switzerland) Ltd.January 2012
 J.P. Morgan Securities plc, London, Zweigniederlassung ZürichJanuary 2011
 Neue Helvetische Bank AGJanuary 2011
Table 6. The most recently opened banks in Switzerland.
Share on Google+