Banks and bank-like companies

The concept of “banks” includes all financial intermediaries that are governed by the Swiss Banking Law (SBL). Pursuant to art. 2a of the banking ordinance, the definition of banks which are subject to registration includes all institutions that publicly solicit third-party money for the purposes of safekeeping. Other criteria for the definition of banking activities are met by institutions that:

Institutions which are subject to the SBL are required to submit to the SNB at regular intervals a report on their balance sheet, income statement, equity and liquidity. The SNB statistics generally relate to the business activities of the parent company. This covers the domestic head office plus the legally non-independent subsidiaries in Switzerland and abroad. At the end of 2015, the SNB bank statistics covered 266 banks with approx. 103,000 employees in Switzerland.

The Swiss banking system is based on the concept of universal banking, whereby all banks can offer all banking services. Nevertheless, it has seen the development of various categories of banks that have come to specialize in specific areas. Swiss banks are structured in the following categories.

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. Only the canton of Berne plans to phase out the state guarantee by 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.

Cantonal banks may be established either as public institutions or public limited companies. 16 of the 24 cantonal banks are public legal entities in their own right. Six cantonal banks are mixed stock companies or entities under special law: Banque Cantonale Vaudoise, Zuger Kantonalbank, Banque Cantonale du Jura,
Banque Cantonale du Valais, St. Galler Kantonalbank and Banque Cantonale de Genève. The cantonal banks of Berne and Lucerne are private stock companies. The smaller cantonal banks concentrate on savings and mortgage business, while the larger ones offer a wide range of services and are basically no different from the average full-service bank. The Association of Swiss Cantonal Banks (ASCB) represents the joint interests of cantonal banks.

Big banks

The category of big banks consists of two banks: UBS AG and Credit Suisse Group. A strong international focus and business network is a characteristic shared by both big banks. Both big banks have branches and subsidiaries in more than 50 countries and are present in all major financial centers around the world. Being universal banks, the big banks maintain a tight network of domestic branches. The big banks offer essentially all types of financial services, including notably investment banking (capital market transactions, securities trading, execution of money market transactions, financial engineering, securitized lending transactions as well as consulting in and conducting mergers and acquisitions).

Regional and saving banks

The regional and savings banks operate in similar business areas to the small cantonal banks. They focus their activities primarily on the savings and mortgage sectors. Around half of their liabilities and amounts due to customers take the form of savings deposits and investments; mortgage loans accounted for some three-quarters of assets. RBA banks are independent institutions that co-operate with each other through the RBA Holding. This co operation enables them to improve their cost structure, promotes professional expertise and affords a joint safety net and solidarity network. The RBA group includes the Valiant banks and Clientis banks. Along with their joint services and competence centre Clientis AG, the approx. 20 Clientis 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. Another approx. 30 regional banks, including four of the five largest 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 Switzerland’s largest regional bank, New Aargauer Bank, as a subsidiary of Credit Suisse Group, and the third-largest one, Baloise Bank SoBa, as a subsidiary of Bâloise Holding.

Raiffeisen banks

Raiffeisen banks are the only group of banks structured as co-operatives. They are associated in the Raiffeisen Switzerland co-operative. At the end of 2015, the Raiffeisen Group consisted of 270 independent, regionally rooted co-operative banks with a history that goes back more than a century. The group co-operates with Helvetia Group in the area of pension schemes and insurance, with Vontobel in the areas of trading and investment services, and with the Aduno Group in the area of consumer lending. 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 favorable 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. This comprehensive support enables local Raiffeisen banks to concentrate on their core business – i.e. providing advice and selling banking services to their clients. Raiffeisen banks engage almost exclusively in domestic business and focus primarily on the interest income business.

Private banks

The 7 private bankers are among the oldest institutions in Switzerland. Most of them were founded in the 18th century. Private bankers primarily engage in asset management and banking services related thereto (underwriting and fiduciary business, securities trading), but conduct barely any interest income business. Private bankers are structured as individual companies, joint companies or limited partnerships and their owners have unlimited private liability in respect of their own personal assets. If they do not 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.

Foreign banks

The 85 foreign-controlled banks are constituted under Swiss law as independent banks. They engage mainly in asset management for private customers (private banking) and in fund management and distribution. Some of these banks are world leaders in trade financing. Nearly 30 foreign bank branches are not structured as independent entities and are deemed part of their respective head office abroad, both in terms of their business activities and in legal terms. They engage primarily in capital market transactions. All foreign-controlled banks and branches of foreign banks have been associated in the Association of Foreign Banks in Switzerland (AFBS) since 1972. Most foreign banks in Switzerland are branches or subsidiaries of banks based in Europe.

Other banks

This category of banks subsumes a variety of institutions: stock exchange and securities banks, institutions specializing in asset management, as well as institutions engaging in personal loans, installment contracts and consumer credits. Stock exchange and securities banks include banks such as Julius Baer, Clariden Leu and Bank Sarasin. They are structured as private stock companies and engage primarily in offering asset management services to domestic and foreign clients. The Association of Swiss Commercial and Investment Banks represents the shared interests of stock exchange and securities banks.

Non-bank financial intermediaries

In addition to banks and their joint organisations and systems, the Swiss financial centre also accommodates non-bank financial intermediaries. The category of non-banks or quasi-banks subsumes an estimated multitude of more than 6,000small and ultra-small companies, whose combined contribution to the value added of the financial services sector is, however, quite significant. The heterogeneous group of quasi-banks may be classified into two groups by supervisory criteria: financial intermediaries that are subject to specific federal supervision, and those which are only subject to the Anti-Money Laundering Act. Financial intermediaries subject to specific federal supervision include in particular managers of Swiss investment funds (Investment Fund Law), life insurance companies (Insurance Supervision Law) and securities traders (Stock Exchange Law). Financial intermediaries subject only to the Anti-Money Laundering Act (AMLA) include all such entities that accept assets from third parties on a professional basis for safe custody or assist in the investment and transfer of assets (e.g. asset managers, brokers, exchange offices, lawyers, credit card companies). Two categories of non-bank financial intermediaries are described in more detail below.

Independent asset managers

Independent asset managers account for a large number of the quasi-banks. Many of them are associated in the Swiss Association of Asset Managers (SAAM) with more than 1,000 members. An asset manager generally manages his clients’ assets and provides financial and asset related consulting services. The asset manager acts by proxy on behalf and for the account of his clients, and the clients are not directly involved in individual investment decisions and their implementation. Clients’ assets are held in accounts at custodian banks. Another characteristic of independent asset management is that the asset manager manages his clients’ assets autonomously in line with his own principles, i.e. his decisions are not influenced by third parties. The asset manager is thus also free from restrictions in his choice of investment products. An independent asset manager may either engage in standard asset management, or specialize in specific asset classes or investment products. Many independent asset managers offer a comprehensive range of wealth management services, including for instance tax consulting.

Independent asset managers are subject to a license under the Anti-Money Laundering Act and have to be a member of an accredited anti-money laundering self regulatory body. However, in other respects they are only moderately regulated by comparison with banks or securities dealers. This opens up possibilities for regulation arbitrage within the sector, leading to unwarranted distortions in competition. To better control the reputational risk for the Swiss financial centre, independent asset managers should be regulated more tightly, thus putting all asset managers on an equal footing. The responsibility for such tighter regulation is incumbent on FINMA and not on the banks.