The key ingredients of the Swiss financial sector

Switzerland has spent generations building up a powerful financial sector, which is fabled worldwide for both positive and negative reasons.

Banks are as synonymous with Switzerland as chocolate and cheese – and they have their own ingredients that continuously adapt to meet future challenges.

Top of the menu is hundreds of years of experience at managing the wealth of the world’s richest people and families.

Swiss private banks trace their roots back some 250 years as the financial arms of merchant trading houses. They have since grown in stature, with at least CHF2.2 trillion ($2.5 trillion) of offshore wealth sitting in their vaults.

But Switzerland’s hold as the world’s premier wealth management centre is facing stiff competition, particularly from Asia and the Middle East.

Part of the reason is the eastward shift in economic might and the desire of wealthy people to keep their assets close to home.

Other geopolitical pressures are also bearing down on the Swiss wealth management centre. Finance also plays an integral part in political ambition and conflict.

Russia’s invasion of Ukraine has unleashed a growing list of economic and financial sanctions, which demand the compliance of Swiss banks.

The Swiss financial centre is compelled to keep ahead of the game to retain its reputation has a global powerhouse. This requires adding fresh ingredients to the mix, including new technologies such as Artificial Intelligence and Distributed Ledger Technology.

The creation of a thriving cryptocurrency sector has helped Switzerland keep pace with the rapidly evolving world of digital assets.

Switzerland has also set itself the goal of becoming a global hub for sustainable finance that champions more responsible investing.

But not all NGOs are convinced by the rhetoric and are constantly snapping at the heels of Swiss banks to improve their green credentials.

There is no doubting the importance of the powerful Swiss financial industry that accounts for 9% of domestic economic output and plays a key role on the international stage.

The banking sector has nevertheless been shaken by the demise of Credit Suisse bank, which was sold on the cheap to its rival UBS, costing thousands of jobs.

This has sparked a national debate on whether regulations and the financial regulator are robust enough to protect the Swiss economy from another banking crisis.

Perhaps the most potent ingredient of the industry is the highly skilled people that it is able to recruit. Maintaining the pipeline of new talent in the face of challenges will be one of the sector’s most critical tasks.

Edited by Reto Gysi von Wartburg/gw