Switzerland's prosperity is strongly linked to the success of its banks and other financial institutions, says a new survey.
When measured by size, the Swiss financial sector falls behind financial centres in the United States, Britain, Japan, Germany and France. But the financial sector is disproportionately large for a country the size of Switzerland.
That's the main conclusion of the study released by the Créa Economics Institute at Lausanne University.
Switzerland's stock market capitalisation places it eighth worldwide and is worth 2.8 per cent of the global total. Its bond market is somewhat smaller, making up 1.7 per cent of the world's total.
Together, the stock exchange and the bond market account for around a quarter of the country's annual gross domestic product.
The survey also highlights the important role played by asset management. At the end of 1999, Créa says Swiss asset managers controlled funds worth around SFr4 trillion.
The importance of the country's financial sector is also reflected in the continuing significance of the Swiss franc as a trading currency. In April 1998, the franc was the fifth most important currency behind the US dollar, the German mark, the Japanese yen and the British pound.
According to the survey, the financial sector generates around 14 per cent of the country's whole economic worth - the largest proportion in the world. One in 20 Swiss people are employed by the industry.
Moreover, every fifth franc paid in taxation comes from the financial branch. Banks alone are responsible for 13.5 per cent of taxation revenues.
Low interest rates
The low level of Switzerland's interest rates has helped the country's banks and other financial institutions maintain their unique place in the economy says Créa. Between 1976 and 1998, the average interest rate charged by industrialised countries has been around 4 per cent, while the rate has been around 2 per cent in Switzerland.
The reason for the country's ability to keep its interest rates so low lies in Switzerland's attachment to banking secrecy laws and its refusal to take part in international agreements to swap taxation information.
These advantages are worth defending say the report's authors. But they question whether this is possible given the pressure being brought to bear by the European Union.
The report concludes that an erosion of the financial sector's position would be costly not only to the industry itself but also to the Switzerland's social well-being.
swissinfo with agencies
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