Twice a year, the Swiss State Secretariat for International Finance (SIF) publishes a report relating to Switzerland’s position as a financial center. Reports are based on statistics provided by the Swiss National Bank (SNB) and other sources.
moneyland.ch compiled the most interesting statistics from the current report and supplemented them with data from the Swiss National Bank and its own analyses to paint a clear picture of the state of Switzerland's financial services sector.
1. Notable decline in value creation
Value creation by banks and other financial services providers as drastically declined in recent years. While Swiss financial services providers created 73.8 billion Swiss francs in value in 2007, their total value creation in 2017 was just 59.9 billion francs.
Over the same period, Switzerland’s gross domestic product (GDP) grew from 576 billion francs in 2007 to 668 billion francs in 2017.
Value creation by Swiss insurance companies in absolute figures increased slightly over the same period, from 26.8 billion francs in 2007 to 28.9 billion francs in 2017.
The decline is best shown as percentages of GDP. In 2007, value creation by banks and other financial services providers made up 8.17 percent of Switzerland’s GDP, while value creation by insurance providers made up 4.65 percent of the GDP. Together, value creation by the financial services sector made up 12.8 percent of the national gross domestic product.
In 2017, only 4.64 percent of the GDP was comprised of value creation by Swiss banks and other financial services providers, and only 4.32 percent was comprised of value creation by insurance companies. In total, value creation by the financial services sector made up 9 percent of Switzerland’s 2017 gross domestic product.
Verdict: The role of banking in the Swiss economy is declining. This trend will likely continue in the coming years due to increasing digitization and competition from foreign fintech enterprises.
2. Banks are cutting jobs
In 2008, around 123,700 full-time employees worked for Swiss banks. In 2018, Swiss banks employ around 105,000 full-time employees. That translates into a decline of 15 percent over 10 years.
In 2008, Swiss banks provided 110,100 full-time jobs in Switzerland. In 2017, banks contributed around 93,500 full-time workplaces to the Swiss job market. Around one-third of these workplaces – approximately 35,000 – were filled by women.
Employment by insurance companies also decreased somewhat, from around 43,500 full-time jobs in 2008 to around 41,300 jobs in 2018. When workplaces which directly depend on financial services providers are accounted for, the Swiss financial services sector provides jobs to a total of 204,500 employees.
3. The number of banks is declining
The number of cantonal banks has remained constant over recent years, at 24 cantonal banks. However, the number of regional banks and savings banks has declined from 76 in 2007 to just 62 in 2017. While 14 Swiss private banks operated in 2007, Switzerland had only 6 private banks in 2017.
Foreign-controlled banks in Switzerland also showed a drastic decline – from 122 foreign-controlled banks in 2007 to just 76 in 2017.
Verdict: Up until now, bank closures have primarily occurred among foreign-controlled banks, private banks and small regional banks. Foreign-controlled banks and private banks were hard hit by the last financial crisis and bilateral agreements which redefined bank customer secrecy. Consolidation is primarily responsible for the decline in the numbers of Swiss regional banks and savings banks.
Consolidation will likely lead to the disappearance of many more banks, largely due to the digitization of financial services.
4. Bank branches on the decline
It is not just banks themselves that are dwindling in numbers. The number of bank branch offices in Switzerland has been in decline since 1988. Statistics from the SNB show that banks operated 5555 head offices and branch offices in Switzerland in 1988. By 2008, that number had declined to 3488, and in 2017 there were only 2939 bank branches in Switzerland.
“The number of bank branches will continue to decrease in the future,” according to moneyland.ch CEO Benjamin Manz. The driving force behind this change is consolidation due to the increasing digitization of the banking sector. The number of consumers who carry out their banking activities at bank branch offices is on the decline.
In the future, consumers will increasingly open bank accounts, change accounts and even receive financial consultation remotely via digital devices. Physical bank branches will become less necessary.
5. Bank stocks are performing poorly
The prices of stocks in Swiss insurance companies have climbed steadily since 2008 and have even significantly outperformed the Swiss Performance Index (SPI). Since 2008, Swiss insurance company stocks have doubled in value according to the SNB.
That is not the case with Swiss banks. Bank stocks drastically declined in value in 2008 and have not fully recovered. In 2018, stocks in exchange-listed Swiss banks are still only worth around half of what they were worth at the beginning of 2008.
6. Less life insurers and reinsurers
According to FINMA statistics, the number of non-life insurance providers has remained constant in recent years. A total of 117 non-life insurance providers operated in Switzerland in 2007, compared to 118 in 2017.
Reinsurance providers, on the other hand, declined in number from 71 institutions in 2007 to just 55 in 2017. While 26 life insurance providers were in operation in 2007, only 19 life insurers operated in 2017.
The rapid drop in the number of health insurance providers which offer supplemental health insurance is also noteworthy. 47 such companies operated in Switzerland in 2007, compared to just 12 in 2017.
7. Rising mortgage debt
The total amount of Swiss mortgage debt is incredible – and growing. At the end of 2014, Swiss borrowers carried around 897 billion francs in mortgage debt. By the end of July 2018, that amount had grown to 992 billion francs according to SNB statistics. That is an increase of more than 10 percent over just 4 years.
If the trend keeps up, Swiss mortgage debt may cross the 1-trillion-franc threshold. “Concern over a burst of the mortgage bubble increases along with the growth in mortgage debt,” says Benjamin Manz.
8. Investment in securities on the rise
In total, custody account holders in Switzerland held 3053 billion francs worth of securities in Swiss custodian banks at the end of 2017, compared to 2350 billion francs in 2013. Account holders include private investors, companies and institutional investors.
Stocks held increased from 746 billion francs in 2013 to 971 billion francs in 2017. Interestingly, investment in bonds also increased in recent years, from 694 billion francs worth of bonds in custody in 2013 to 730 billion francs in 2017.
The most surprising development is the strong growth in collective investment vehicles (like mutual funds), which grew from 845 billion francs in 2013 to 1294 billion francs in 2017.