Swiss Banking Sector

Switzerland is a country of strong institutions deeply rooted in its pluralist, democratic, and federalist culture. However, its independence, security, and stability are to a large extent the fruit of cross-border exchange. Indeed, Switzerland – so poor in raw materials, so rich in successful ventures – is the living expression of openness to the world at large. 

In addition to numerous other qualities, the banking sector in Switzerland distinguishes itself through its diversity and heterogeneity. Over time, very different banking groups have developed and to some extent become specialized.

The Swiss banking system is based on the model of universal banking. This means that all banks can provide all banking services, such as:

• Credit/lending business
• Deposits and deposit business (savings accounts, etc.)
• Asset management and investment advice
• Payment transactions
• Securities business (stock exchange transactions)
• Underwriting business (issuing bonds or shares)
• Financial analysis

Banks that are active in Switzerland can be divided into the following banking groups.

1. Big Banks

The big banks offer essentially every type of transaction, particularly investment banking (capital market transactions, trade with securities, performance of money market transactions, financial engineering, securitized lending transactions as well as consulting in and conducting mergers and acquisitions). A strong international focus and business network is a characteristic shared by the big banks. The group of big banks includes Credit Suisse Group and UBS AG. Both big banks have branches and subsidiaries in more than 50 countries and are present in all major financial centers around the world. Together, the two big banks account for over 50% of the balance sheet total of all banks in Switzerland.

2. Cantonal Banks

Cantonal banks are defined as banks with a statutory basis under cantonal law, with the canton holding a minimum of one-third of the bank’s capital and voting rights. With the revised Banking Law of 1st October 1999, the state guarantee is no longer a constitutive characteristic of cantonal banks. The Canton of Bern was the first canton to abolish this, and did so as per the end of 2012. All other cantonal banks continue to benefit from unrestricted state guarantee, with the exception of Banque Cantonale Vaudoise and Banque Cantonale de Genève, of which the former had no state guarantee at all and the latter a limited state guarantee even prior to the Banking Law revision.

As at the end of 2013, the cantonal banks’ total assets ranged from CHF 2.6 billion to over CHF 147 billion. The smaller cantonal banks concentrate on savings and mortgage business, while the larger ones offer a wide range of services and can be described as typical universal banks. The Association of Swiss Cantonal Banks (ASCB) represents the joint interests of cantonal banks.

3. Private Banks

The private bankers are among the oldest banks in Switzerland and consist of individual enterprises, collective and limited partnerships. Private bankers are subject to unlimited subsidiary liability with their personal assets, insofar as the institution does not operate as a public limited company (AG). Their most important field of activity is asset management, primarily for private customers. If they do not publicly solicit deposits from third parties, private bankers are not required to build statutory reserves or publish annual financial statements. However, they are subject to all other provisions of SBL, in particular requirements in respect of equity capital. Private bankers have been associated in the Swiss Private Bankers Association (SPBA) since 1934.

4. Regional and Saving Banks

The banks in this group concentrate primarily on the traditional interest business, with mortgage loans and loans to businesses on the one hand and customer funds in the form of savings and investments on the other. Their business operations resemble very much the business operations of the smaller cantonal banks; their geographic field of business is generally smaller. Their advantage is customer proximity; they are acquainted with local circumstances and with regional business cycles. Most regional and saving banks have preserved their local character and are still today often organized as cooperatives or as stock companies with their securities being held by their own customers or the local population. 

At the end of 2014, 36 regional and savings banks were part of the RBA group, including the Valiant Bank. Banks of the RBA group operate as independent institutions. The RBA-Holding constitutes their roof and provides them with various services. The affiliate and central bank Entris Banking administers the current accounts of the independent institutions, processes payments and serves as the Global Custodian. Many regional and savings banks have also outsourced back office and support processes to Entris Banking. On September 1, 2014, the RBA group has celebrated its 20th birthday.

The RBA group includes, among others, 17 Clients banks. Along with their joint services and competence centre Clients AG, the Clients banks form a contractual group and mutually co-ordinate their activities, notably in the areas of joint refinancing, group-wide processing, consistent branding and decentralized distribution.

The remaining 27 regional banks – amongst them four of the five biggest regional banks in Switzerland – do not form part of the RBA Holding. Some of them have been acquired by other financial groups over time and are managed as independent business areas within those groups. These include the biggest regional bank in Switzerland, the Neue Aargauer Bank, nowadays a subsidiary of Credit Suisse Group and Baloise Bank SoBa, the third biggest regional bank and subsidiary of Bâloise Holding.

5. Raiffeisen Banks

Raiffeisen banks are the only group of banks structured as co-operatives. They are associated in the Raiffeisen Switzerland co-operative. In mid-2014, the Raiffeisen Group consisted of 305 independent, regionally rooted co-operative banks with a history that goes back more than a century.

The Raiffeisen banks concentrate primarily on retail banking. The individual Raiffeisen banks are primarily active regionally, but together they form a nationwide group. Raiffeisen Switzerland assumes the strategic management function for the entire Raiffeisen Group and is responsible for the group-wide risk diversification, liquidity and equity holding and refinancing. Furthermore, it co-ordinates group activities, creates favourable business conditions for the regional Raiffeisen banks and provides general consulting services and support to its members. Raiffeisen Switzerland also assumes the role of a central bank in providing treasury, trading and transaction services.

6. Foreign Banks

The approximately 90 foreign-controlled banks are organized in accordance with Swiss law and are independent banking institutions. Their primary activities are wealth management with foreign private customers as well as the funds business. In addition, a number of these institutions are global leaders in trade finance. Capital markets-related business is primarily conducted by the branches of foreign banks. These are not legal entities in their own right. Instead, they are legally and economically controlled by their parent company. All of the foreign-controlled banks and the branches of foreign banks are members of the Association of Foreign Banks in Switzerland (AFBS), which was formed in 1972. The majority of foreign banks in Switzerland are of European origin.

7. Banks that Specialize in Stock Exchange, Securities and Asset Management Business 

This group of banks primarily comprises public limited companies set up under private law and governed in Switzerland. They concentrate chiefly on asset management for domestic and foreign clients. With only a few exceptions, these institutions, together with other individual banks, are members of the Association of Swiss Asset and Wealth Management Banks.

8. Other Banks

Banks falling into this category include three retail banks with operations across Switzerland. One of these, Post Finance, has a restricted banking license only. The remaining banks either conduct consumer financing activities or have no particular shared characteristics.