Credit Suisse reports brighter Swiss financial sector outlook

The review of the nation's financial sector is published every two years by Switzerland's second-largest bank. Keystone

The Swiss financial sector has faced several crises and structural changes since 2007, but wealth management is doing well, says a Credit Suisse study released on Friday.

While the sector has successfully weathered a global financial crisis, low interest rates, a clean money policy and a flood of regulations, these challenges have taken a toll, Credit Suisse said.

The study showed that the financial sector’s contribution to Switzerland’s gross domestic product (GDP) fell from over 11% in 2007 to 9% in 2017. Employment in the banking sector dropped to around 215,000 full-time equivalents, the study showed. In ten years, 70 institutions have left the Swiss financial market, of which 40 were foreign banks.

Wealth management forecast

Going forward, the sector should benefit from an improved global market environment, Credit Suisse noted, adding that the Swiss market is expected to play a leading role in global growth of the wealth management business. The international wealth managed in Switzerland is predicted to rise from the current CHF2,700 billion ($2,720 billion) to almost 3,100 billion by 2021, according to the authors. That of domestic clients should go from about CHF3,300 billion to 3,700 billion in the same period.

However, margins in the credit business will remain weak, even if interest rates rise again, according to Credit Suisse. Competition will remain strong in terms of credit operations, while mortgage activity should slow down.

Regulation and market access

The Credit Suisse experts included some recommendations for regulations on implementing international standards, access to the European market, and sustainable finance and digitisation. They said they would also like to see the Federal Council become more involved in setting international standards. In the short term, the bank calls on Switzerland to adopt regulations equivalent to those of the EU, and to actively negotiate bilateral accords with key markets – notably Great Britain.