Banking sector of switzerland

BANKING SECTOR OF SWITZERLAND

Overview

Banking system in Switzerland is one of the most developed systems in the world. It has a very long tradition. As in many other countries in Switzerland there is one national bank and business banking sector. Cantonal banks exist as unique sector.
Financial sector is among the key business sectors in Switzerland. Banks contributes CHF 43 bn. to the real net output, which corresponds to 9% of GDP. The insurance sector contributed CHF 23 bn. or 4.8% of GDP. 200,000 employees work in the financial sector. That represents 5.3% of the total workforce. Broken down, 3.2% of the total workforce works for banks, 1.4% for insurance companies and 0.6% for other financial services providers.
Banks are also important tax payer in Switzerland and they paid around 2 billion CHF every year.
Protection of clients assets, privacy and information is main characteristic of banking in Switzerland. Bank secrecy is also one of the characteristics of banking in Switzerland and it was first codified in a 1934 law. All banks in Switzerland are regulated by Swiss Financial Market Authority (FINMA), which derives its authority from a series of federal statutes.

Gross domestic product of Switzerland (GDP) is higher than of some larger western European countries, which makes it very prosperous nation. Value of the Swiss franc (CHF) has been very stable comparing to that of other currencies. 5,6% or 180.000,00 of the total Swiss workforce are employed in financial sector of whom 110.000,00 are employed in banking sector.

One of the reasons why banking sector was able to greatly develop is Swiss neutrality and national sovereignty which developed fostered and stable environment. Switzerland has maintained neutrality through both World Wars, is not member of the European Union, and was not a member of the United Nations until 2002.

BIS, The Bank of international Settlements, an organization that cooperates among the world’s central banks has a headquarter in the city of Basel. BIS was located in Switzerland because of the country’s neutrality. This was important because countries that founded it had been on the both sides of World War I.

Law and regulation

The Swiss Financial Market Supervisory Authority (FINMA) as a public law institution supervises banking-related activities, securities markets and investment funds.
In 1993 the office of the Swiss Banking Ombudsman was founded and it is sponsored by the Swiss Banking Ombudsman Foundation, which was established by the Swiss Bankers Association. The ombudsman’s services are free of charge and include assistance to persons searching for dormant assets. About 1.500,00 complaints are raised against banks every year.

Major banks
There are 408 authorized banks and securities dealers in Switzerland, from “Two Big Banks” to small banks that serve needs of special clients or single community.
Two largest Swiss banks are UBS AG and Credit Suisse and they account over 50% of all deposits in Switzerland.

UBS

UBS exists since 1998, when Union Bank of Switzerland and Swiss Bank Corporation merged. It is headquartered in Zurich and Basel. It has seven offices around the world (four in the United States and one in London, Tokyo and Hong Kong) and branches in five continents.
UBS is second-largest bank in Europe and it has also major presence in the Unites States. Additionally UBS is leading provider of retail banking services in Switzerland. Invested assets are 3.265 trillion CHF, shareholders equity is 47.850 billion CHF and market capitalization is 151.203 billion CHF by the end of 2007. According to the UBS website the bank had 81557 employees in 2009.
UBS is organized in four business groups: Global Wealth Management & Business Banking, Investment Bank, Global Asset Management and Corporate Center.

Main competitors of UBS bank are Deutche Bank, Fortis, Morgan Stanley, Credit Suisse.
UBS was named one of the 100 Best Companies for Working Mothers living in the U.S. by U.S. Working Mother Magazine. It is a member of the Stonewall Diversity Champions scheme and has active ethnic minority and women’s networking groups. UBS was included on Business Weeks The Best Places to Launch a Career.

Credit Suisse

Credit Suisse is headquartered in Zurich, Switzerland. It was founded in 1856 by Alfred Escher under the name Schweizerische Kreditanstalt. Bank has three divisions, Investment banking, Private Banking and Asset Management.
Credit Suisse opened its first branch outside of Switzerland in 1942 in New York City. In 1993 Credit Suisse Group bought Schweizerische Volksbank. In 1996 the two retail banks were merged and renamed Credit Suisse.
Credit Suisse is one of the world’s largest private banking organizations with branches in Switzerland and in other countries. Private banking specializes in providing personal investment counselling and professional asset management to affluent individuals.
In corporate & Retail Banking, Credit Suisse has leading position in the Swiss market. It provides a wide range of banking services for private and corporate clients in Switzerland. It also offers online banking services.

Swiss National Bank

The Swiss National Bank (SNB) is the central bank of Switzerland. It is responsible for Swiss monetary policy and for issuing Swiss franc banknotes. National bank was founded in 1907 as copartnership
About 55% of its shares are owned by public institutions like cantons and cantonal banks.
It was founded by the Federal Act on the Swiss National Bank. Its shares are publicly traded and are held by the cantons, cantonal banks and individual investors. Although a central bank often has regulatory authority over the country’s banking system, the Swiss National Bank does not. Regulation is solely the role of the Federal Banking Commission. Swiss National Bank began its work in 1907 and was organized as a joint stock company. Its actions are registered and are on the Listing of stock exchange. Share capital amounts to CHF 25 billion of which 55% of public and the rest is owned by a larger number of private persons (Confederation has no stock participation, but there are significant influence through the appointment of the members of the Council of banks).
Under the National Bank of its primary obligation is to implement monetary policy to use the country as a whole, providing stability of prices, taking due care on the development of the economy. As a special obligation to apostrophized: 1) the provision of liquidity of money market, 2) distribution of cash; 3) the provision of non-cash platnog prometa; 4) management of foreign exchange reserves, and 5) providing adequate contribution to the stability of the financial system.

Bank secrecy

Legal principle under which banks are allowed to protect personal information about their customer is called bank secrecy or bank privacy. Bank secrecy is better achieved in certain countries, such as in Switzerland.
Created by the Swiss Banking Act of 1934 the principle of bank secrecy is considered as one of the main aspects of private banking. It also has been accused by some governments of being one of the main instruments of underground economy and organized crime.
Under the principle o bank secrecy Swiss law strictly limiting any information shared with third parties. The law only permits a bank to share information with others in cases of severe criminal acts, such as identifying a terrorist’s bank account.

Taxation in Switzerland

Taxes in Switzerland are levied by the Swiss Confederation, the cantons and the municipalities. Switzerland has low rate of taxation. The original authority to levy taxes is vested in the individual cantons of Switzerland through their constitutions. Within the bounds of the authority delegated to them by cantonal law, the municipalities may also levy taxes. The extent of that authority varies from canton to canton. The most significant taxes are income tax, a withholding tax and a value added tax. Switzerland is unique among modern sovereign states in that the authority to levy these taxes is limited in duration and extent.

The federal constitution imposes certain limits on taxation at the federal, cantonal and municipal levels. To begin with, it provides that no tax may be levied except where provided for by federal, cantonal or municipal statute. Because statutes can at all levels to be made subject to a popular referendum, Swiss tax rates are in practice set directly by the voters through instruments of direct democracy. The constitution mandates that taxation must be general and equal in nature and it must be proportionate to ones ability to pay.
All persons resident in Switzerland are liable for taxation of their income and assets, except on the income and wealth from foreign business or real estate. Non-residents are also taxed on certain Swiss assets or on the income from certain Swiss sources, such as from real estate, permanent business establishments or pensions. the income and assets of spouses are pooled and taxed jointly, but at a lower rate to offset the effects of tax progression.

Tax is levied by the Confederation and by the cantons on the income of natural persons. The income tax is imposed as a payroll tax on foreign workers without residence permit.
Taxable income includes all funds accruing to a person from all sources and including the rental value of a house lived in by its owner.
Non-working foreigners resident in Switzerland may choose to pay lump-sum tax instead of the normal income tax. This tax is much lower than normal income tax. This option contributes to Switzerland’s status as a tax heaven and has induced many wealthy individuals to live in Switzerland.

Profit tax

On corporate profits a proportional or progressive tax is levied by the Confederation and the cantons. The tax is based on the net profit as accounted for in the corporate income statement, as adjusted for tax purposes

Value added tax

The value added tax (VAT) is one of the Confederations principal sources of funding. Its rate is 7.6 percent on most commercial exchanges of goods and services. Certain exchanges such as books and newspapers are subject to a reduced VAT of 2.4 percent.
Numbered bank account
A numbered bank account is a normal bank account where the name of the bank client is replaced by a number or a code word. A numbered bank account is under no circumstances anonymous and differs in neither legal nor tax matters from a normal banking relationships. The only difference is that the account holder is only known to a restricted number of bank employees and the name of the client does not appear in documents such as bank account statements.
Numbered bank accounts are regulated under both international and national laws, particularly concerning the fight against money laundering.
Numbered bank accounts do not differ from normal bank accounts in legal and tax matters, but at the opening of the banking relationship the identity of the holder has to be examined in accordance with the international and national guidelines.
Offshore bank

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax country that provides financial and legal advantages which may be greater privacy, low taxation, and easy access to deposits or protection against local political or financial instability.

Swiss franc

Currency of Switzerland and Liechenstein is the franc. The Swiss franc is the only type of frank that is still issued in Europe. A hundredth part of franc is a Rappen in German, centesimo in Italian and centime in French. The code for Swiss franc is CHF which means Confoederatio Helvetica franc.
Helvetic Republic introduced a currency based on French franc in 1798. This franc was issued until rhe end of Helvetic Republic.