The importance of the Swiss banking sector
An economic perspective
The importance of the Swiss banking sector – SBA – August 2012 1
The importance of the Swiss
Executive Summary 5
1 The banking sector as part of the economy 7
2 Direct economic importance of the banking sector 9
2.1 Value added 9
2.2 Employment 12
2.3 Taxes 13
3 The importance of the banking sector for other areas 14
3.1 Value added 15
3.2 Employment 16
4 Conclusion 18
The Swiss banking sector has seen some extremely dynamic changes to economic and
regulatory conditions in recent years. Banks as well as the authorities are confronting the
challenges this raises each and every day – a task made all the more difficult by the fraught
global economic and political environment. This, in turn, puts the public spotlight on the
banking sector: not only because it is so important to the Swiss economy, but also because
it occupies a leading international position in a variety of business areas.
This study provides an overview of the economic importance of the Swiss banking sector
and its significance for other economic sectors. The analyses are based on calculations per-
formed by BAKBASEL, which were commissioned by the Swiss Bankers Association (SBA).
According to BAKBASEL‘s findings, in the past 20 years the banking sector made the largest
contribution to Swiss economic growth of all sectors of the economy. At 6.1% of gross value
added in 2011, the share of gross value added of banks is slightly down on previous years.
However, the benefit they create for other economic sectors remains high, since a thriv-
ing banking sector is an important consumer of goods and services. This interconnectivity
means that for every 100 bank employees, another 115 jobs are created in other sectors by
indirect effects. Alongside the CHF 32.4 billion generated by the Swiss banking sector, the
indirect effects of this contribute an additional CHF 17 billion of value added, leading to a
total 9.3% share of Swiss overall economy.
In the years leading up to 2020, the value added created by the banking sector should grow
at 1.9%, roughly the same rate as the economy as a whole. Growth could dip in 2012 and
2013 due to the adaptions to new framework conditions, before picking up little by little as
the end of the forecast horizon approaches. Accordingly, the banking sector‘s share of gross
value added should be almost 6%. The share of the entire financial sector (banks, insurance
and other financial service providers) will likely amount to 11.5% by 2020. This level can be
achieved despite a slight dip in employment by increasing efficiency in service provision.
The importance of the Swiss banking sector – SBA – August 2012 5
As Figure 0-1 shows, employment is likely to fall slightly as of the current year and then re-
main broadly constant, while gross value added will increase moderately.
0-1 Gross value added and employment in the banking sector
CHF bn employees
45 145 000
40 140 000
35 135 000
30 130 000
25 125 000
20 120 000
15 115 000
10 110 000
5 105 000
0 100 000
Gross value added Employment
Note: The dashed line indicates the forecast trend.
Various analyses of late have shown that margins in banking will continue to fall in the future.
In order to compensate for this, the framework conditions need to be improved such that
additional services can be offered from Switzerland. Otherwise, more extensive headcount
adjustments would appear unavoidable. The figures show that a decline in the business ac-
tivity at banks would have painful consequences for other areas of the economy. Banks and
authorities are therefore called upon to develop promising strategies and to create optimal
framework conditions in the interests of the overall economy.
6 The importance of the Swiss banking sector – SBA – August 2012
1 The banking sector as part
of the economy
Banking services are vital A well-functioning financial system underpins every prospering economy. It assumes the
for economic development important role of providing financial services to businesses and the population as a whole.
In addition to ensuring money supply, this also includes asset management, bank advisory
services and transaction processing for large companies.
Favourable financing Alongside the generous supply of credit – which experienced no restrictions during the last
conditions for business financial crisis – Switzerland as a business location benefits from internationally favourable
financing conditions. This is due not only to generally low interest rates, but also to banks’
low margins. Empirical studies show that an ample supply of credit has a long-term impact
on economic development.
SMEs are the largest For many companies in Switzerland, bank loans remain the most important form of finan-
consumers of credit cing. Small and medium-sized enterprises (SMEs) are especially reliant on this type of fi-
nancing, since they are too small to access the capital markets. Loans to SMEs account
for almost 85% of all business loans in Switzerland (based on volume). At end-2011, this
amounted to CHF 260 billion (of a total of CHF 307 billion in outstanding loans). Of this
amount, CHF 187 billion (or roughly 70%) of business loans were issued to companies with
no more than nine employees. However, according to a survey by SECO, only around one-
third of SMEs has a bank loan.
Multinational companies Alongside these important functions for SMEs, the Swiss banking sector also offers services
benefit from banking that cater for the special financing requirements of multinational companies. Multinationals
services in Switzerland use services in the areas of payments, foreign exchange, securities and institutional asset
management and are important clients for the credit business, export financing, and re-
structurings and takeovers. What is more, many multinational groups process their treasury
management via banks in Switzerland. Syndicated loans are an important source of funding
for large companies.
Banks are drivers The banking sector has seen above-average growth in recent decades, and its high value
of growth added has made it the growth driver of the Swiss economy. Over the last 20 years, however,
the banking sector has grown significantly faster than the overall economy, at an annual
increase of 2.4%. During the global financial crisis in 2008 and 2009, however, the Swiss
banking sector‘s real gross value added fell by 10%. This negative development during the
crisis years caused value added to decline by an average of 0.3 percentage points per year
from 2000 to 2011.
The importance of the Swiss banking sector – SBA – August 2012 7
1-1 Contribution of the nancial sector to real GDP growth in Switzerland
Average growth 2000 – 2011
Other ﬁnancial Construction and Ø Contribution
service providers real estate to growth
Liberalised 2000 –2011
Banks 1990 –2011
services Financial sector Political sector
0% 5% 10% 15% 20% 25%
Share of total economy 2011
Improvement necessary In order to successfully respond to the ongoing fall in margins in the banking sector, the
in framework conditions framework conditions need to be improved such that additional services can be offered
from Switzerland, which will have a positive knock-on effect on business volumes. The qual-
ity of the available workforce and capacity for innovation will be decisive factors here over
the long term, both for business and for the banking sector. The resources of both eco-
nomic sectors – banking and real economy – should therefore be pooled and not played
off against one another. What needs promoting is not real economy or banking, but Swit-
zerland as a business location and a centre of innovation and research. This will enable
Switzerland to maintain its top position among international locations over the long term.
8 The importance of the Swiss banking sector – SBA – August 2012
2 Direct economic importance
of the banking sector
2.1 Value added
Banks are key driver By ensuring the supply of money and providing services such as wealth management, con-
of economy sulting and transaction processing for large companies, banks create key added value for
the economy during their production process. Added value is the difference between value
of production and the inputs used to produce goods and services. Gross value added meas-
ures the amount that is available for salaries and wages, financial capital, profit and interest
on loans excluding gross margins of banks and after write-downs on physical capital.
Over an extended period, the Swiss banking sector has grown significantly above the sector
average. Between 1990 and 2011, real value added increased by an average of 2.4% per year,
compared with an annual growth rate of around 1.6% for the overall economy.
Correction due to the During the global financial crisis in 2008 and 2009, the Swiss banking sector‘s real value
financial crisis added fell by 10%. In a time of rapid global economic change, more stringent regulatory
conditions and protectionist tendencies have amplified the challenges facing banks on a
broad front, while rising risk premiums and falling margins have hampered their earnings
power. The adverse developments triggered since the crisis broke out in 2007 caused value
added in the banking sector to decline by an average of 0.3 percentage points per year from
2000 to 2011. What is striking here is the rapid growth of other financial service providers
during this period, which today account for around 10% of the financial sector. These in-
clude independent asset managers or stock exchanges and securities dealers. The reasons
for this significant growth lie in the settling of new hedge funds, outsourced insurance
activities and higher share prices.
The importance of the Swiss banking sector – SBA – August 2012 9
2-1 Real gross value added in the nancial sector
Average growth 2000 –2011
Banks Insurers Other ﬁnancial Financial sector Overall economy
Development of banking With the value added of its banks stagnating, Switzerland has lagged behind its competi-
sector abroad is more tor locations in Europe and overseas over the last decade (see Figure 2-2). Note, however,
dynamic that most other financial centres enjoy a massive level of state involvement, which puts the
modest development of Swiss banks during this economically difficult observation period
2-2 Real gross value added in the nancial sector compared with international peers
Uniform currency basis (adjusted for purchasing power parity) 2000–2011
Banks in Switzerland have made an active effort to reduce the pressure on costs and mar-
gins in their various business areas. In spite of the challenging international environment,
this led to profits of around CHF 13.5 billion in 2011, almost equalling the prior-year result.
The banking sector generated gross value added of CHF 32.4 billion, equivalent to 6.1% of
Switzerland‘s gross value added. Figure 2-3 shows that this share has gradually fallen since
its 2000 level of 8.9%.
10 The importance of the Swiss banking sector – SBA – August 2012
2-3 Share of the overall economy’s nominal gross value added
Banking sector‘s share 15%
13.1% 11.3% 11.4% 12.2% 12.1% 11.9% 12.7% 13.6% 12.6% 12.1% 11.6% 11.5%
of gross value added
is 6.1% 12% 0.8%
0.8% 0.9% 1.2%
3.8% 0.6% 0.7% 1.2% 1.2%
9% 3.2% 3.7% 4.1% 4.1% 3.4% 4.4%
4.4% 4.0% 4.2%
7.5% 7.3% 7.2% 7.6% 7.8% 8.0% 6.9%
7.1% 6.4% 6.4% 6.1%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Financial sector Banks Insurers Other ﬁnancial service providers
Including insurers, the financial sector as a whole contributed 11.5% to gross value added
in 2011, on a par with its value added ten years ago. Figure 2-3 clearly shows the two boom
periods in the finance industry before the dotcom bubble burst in 2001 and the financial
crisis in 2008.
In future, the banking In future, the banking sector‘s value added will grow at a similar rate to the overall economy,
sector will grow at the at 1.9% per year. After a sluggish start given the rather unfavourable near-term environ-
same rate as the overall ment, growth will pick up once the sector has realigned itself to the expected framework
economy conditions. Based on this forecast growth, the banking sector‘s contribution of value added
to the overall economy should remain at around 6% over the next ten years.
2-4 Forecast real gross value added in the nancial sector
Average growth 2012–2020
Banks Insurers Other ﬁnancial Financial sector Overall economy
The sector‘s forecast development – stagnation and restructuring in the next few years,
then higher growth – will see banks’ share of gross value added level out at 5.7% from 2013
to 2015 before climbing back to today’s level.
The importance of the Swiss banking sector – SBA – August 2012 11
Around 146,000 people (corresponding to 108,100 full time equivalents) were employed in
the banking sector in 2011, compared with 240,000 people (corresponding to 195,800 full
time equivalents) in the financial sector as a whole. This is equivalent to shares of 3.1% and
5.1% of the overall economy. The discrepancy between the respective shares of wealth crea-
tion and employment of the overall economy is due to two factors: on the one hand, the
banking sector has significantly fewer part-time positions than other sectors, which is not
taken into account in the employment share figures. On the other hand, the sector is more
productive than other industries. If we take full time equivalent employment as a basis, the
share of the overall economy comes to 3.1%, respectively 5.7%.
2-5 Share of employment in the overall economy
4.9% 5.1% 5.3% 5.2% 5.2% 5.2% 5.1% 5.2% 5.2% 5.3% 5.1% 5.1%
5% 0.6% 0.6% 0.6% 0.7% 0.8%
0.5% 0.7% 0.7% 0.7%
0.4% 0.8% 0.8%
4% 1.4% 1.4% 1.3%
1.5% 1.5% 1.4% 1.4% 1.3% 1.3% 1.2%
2% 3.3% 3.2% 3.2% 3.2% 3.2%
3.0% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Financial sector Banks Insurers Other ﬁnancial service providers
Stable employment In the last decade, the workforce has increased in line with employment in the overall
economy (see Figure 2-5). In this respect, the banking sector is more stable with regard to
employment than value added. In terms of hours worked, however, the financial sector has
significantly higher growth (18%) than the industry average for the overall economy (13%).
Efforts to reduce The efforts made in Switzerland to reduce the pressure on costs and margins are already
personnel expenses … bearing their first fruits from an economic perspective. In spite of increased regulatory re-
quirements, the cost/income ratio – personnel and administrative expenses to total income
– fell from 82.4% in 2008 to 68.3% by end-2011. The cost reductions did not have any impact
on employment figures, which were largely unchanged versus 2010. This suggests that sav-
ings in personnel expenses were primarily made in remuneration.
… will be continued Due to the enhanced focus on efficiency gains and given the moderate growth forecast for
going forward the banking sector, employment is expected to decline by 0.3% each year until 2020. These
cuts will be driven primarily by measures to exploit economies of scale, for example by
centralising and automating process or outsourcing them to more cost-effective locations.
This is attribuable not least to the results of increased regulatory requirements banks have
to cope with.
Since insurers and the other areas of the financial sector are also likely to create only a few
jobs, we assume that barely any additional jobs will be created in the financial sector as a
whole, with an expected annual decline of 0.1% until 2020.
12 The importance of the Swiss banking sector – SBA – August 2012
2-6 Forecast for employment in the nancial sector
Average growth 2012–2020
Banks Insurers Other ﬁnancial Financial sector Overall economy
Tax revenue from the The provision of banking services brings the state substantial tax revenue. The figure for
banking sector amounted 2011 was CHF 11.2 billion, with CHF 5.2 billion or 46% of this generated by direct taxes.
to CHF 11.2 billion in 2011 These included income tax on dividends, income tax and capital tax for companies, and in-
come tax for employees, which at CHF 3.4 billion accounts for the lion’s share of tax receipts.
The amount received by the state through indirect taxes was even higher at CHF 5.9 billion
or 53%. This figure comprises value added tax, Swiss anticipatory tax and stamp duty. After
factoring in EU tax retention, state receipts totalled CHF 11.2 billion – almost 10% of the av-
erage tax revenue of the federal government, the cantons and the municipalities combined.
2-7 Tax revenue generated by activities of the banking sector, CHF bn, 2011
EU tax retention 0.1
Income and capital taxes 1.3
Value added tax 1.4
Swiss anticipatory tax 2.7
Income tax for employees 3.4
Stamp Duty 1.8 Income taxes on dividends 0.5
Source: SBA, FDF, FTA
The tax revenue generated by the banking sector which is available for public remits is ex-
tremely high relative to its size.
The importance of the Swiss banking sector – SBA – August 2012 13
3 The importance of the
banking sector for other areas
Economic effects The Swiss banking sector, in making a major contribution to overall economic performance,
greater than ascribed in is a key driver of wealth. However, its vital role is not reflected solely in value added and em-
terms of value added ployment levels: the real economic importance of the banking sector is much greater, since
the other sectors of the economy also benefit from the effects of the supply and demand it
creates in terms of value added and employment. However, these effects are not reflected
in the official statistics.
Banking sector is a On the supply side, a well-functioning domestic banking system creates value added for all
network sector economic players, which gives it the character of a network sector. The main importance of
network sectors is that they generate additional benefit for other economic players through
the infrastructure they provide. The better this infrastructure is set up, the more competitive
the players are that use it. A well-functioning banking sector is just as important a part of a
country’s infrastructure as its transportation network or power grid.
3-1 Capital costs compared with international peers
Modiﬁed net interest margin
1.8% 1.6% 1.7% 1.7% 2.0%
Netherlands Germany Sweden United Kingdom Austria Switzerland
2000–2010 2010 2000–2010 2010
Note: modiﬁed net interest margin = net interest income/credit volume
Source: National central banks, OECD
Service offering benefits Figure 3-1 shows that Swiss banks had a lower modified net interest margin in 2010 than
other sectors their international counterparts. Furthermore, this margin has fallen more sharply in Swit-
zerland than in its peer countries versus the average of the last ten years. This low margin
can be explained by the efficiency of service provision and the high level of competition.
Combined with Switzerland’s already low interest rates, it gives companies a cost effective
way of obtaining funding. The locational advantage enjoyed by Switzerland over its inter-
national peers, which over the decades has become a major driver of the overall economy,
has even increased in recent years.
14 The importance of the Swiss banking sector – SBA – August 2012
Companies benefit from On the demand side, too, the banking sector‘s economic activity has a positive impact on
demand-side effects, the value added, employment and income of companies in other sectors as well. These
such as … companies act as suppliers and fulfil demand from the banking sector and companies up-
stream of the entire value-added process. Naturally, supplier sectors also procure goods and
services from other companies, which creates added value there as well.
… demand for inputs According to the production account of the Swiss Federal Office for Statistics, in 2010 banks
and … bought goods and services worth CHF 26.5 billion. More than half of the inputs relate to
payment streams within the sector, i.e. to input relationships between various companies
within the financial sector. The remaining inputs originate from other sectors, for example,
consultancy firms and IT service providers. A portion of the gross value added created here
comes from demand for services from the financial sector. But other inputs, such as for
building services used, also create added value further down the line, namely in the con-
... consumer spending In addition to demand for inputs, further down the line private consumer spending by bank
by bank employees staff also benefits other sectors of the Swiss economy. People working in the banking sec-
tor enjoy above-average incomes, and the provision of these consumer goods and services
therefore leads to high value added, employment and income in other sectors.
3.1 Value added
Demand-side The BAKBASEL impact analysis shows that – alongside the CHF 32.4 billion that the banking
value-added effects sector directly contributes to overall economic performance – an additional CHF 17 billion
amount to of gross value added is also generated. The effective value added effect of the banking
CHF 17 billion sector thus amounted to CHF 49.4 billion in 2011. Approximately 9.3% of overall economic
gross value added was therefore directly (6.1%) or indirectly (3.2%) attributable to the eco-
nomic activity of the banking sector.
3-2 Gross value added effects from production in the banking sector, 2011
Share of gross
Gross value added value added
Direct effects CHF 32.4 bn 6.1%
Indirect effects CHF 6.1 bn 1.2%
Induced effects CHF 10.8 bn 2.0%
Other sectors generated The demand for inputs from other sectors leads to indirect value added effects in other
CHF 6.1 billion in added sectors as a result of the economic links in overall economic production. The banking sec-
value from inputs tor has an input ratio of 42.5%, i.e. every one million Swiss francs of income that banks
generate triggers CHF 425,000 of demand in other companies. Since there is a high level of
interconnectivity in the banking sector, companies outside the banking sector are left with
a comparatively small share of this. Nevertheless, the banking sector generates value added
of around CHF 6.1 billion in other sectors as a result of demand for inputs. This is equivalent
to a good 1% of Swiss overall economy.
The importance of the Swiss banking sector – SBA – August 2012 15
Consumer demand In addition to demand for inputs, other sectors also benefit from induced effects triggered
from bank employees by consumer demand from employees permanently employed in the banking sector or
generates from expatriates. In the case of expatriates, traditional forms of consumer expenditure are
CHF 10.8 billion supplemented by services such as relocating, assistance in finding accommodation, sale/
rental of real estate, tax advice, procurement of work permits, integration services (e.g. lan-
guage courses), etc. Furthermore, international workers are important sources of demand
for international schooling, private teachers and au pairs. Through sector interconnectivity,
this creates gross value added of CHF 10.8 billion in areas outside the banking sector.
The reason why this figure is relatively high is due to the fact that employees in the banking
sector have especially high purchasing power and specific consumer wishes. If we consider
the contribution made by the individual areas within the financial sector, it becomes clear
that the banking sector has an above-average share in the overall effect, especially in the
case of direct and directly induced effects.
Indirect effects are Around 146,000 people were employed in the banking sector at end-2011, and indirect and
crucial to employment induced effects created an additional 168,000 jobs in other sectors. The Swiss banking sec-
tor therefore created employment for some 313,000 people – equivalent to about 6.6% of
all employed people in Switzerland.
3-3 Employment effects from banking sector production, 2011
Share of total
Direct effects 146,000 3.1%
Indirect effects 63,000 1.3%
Induced effects 105,000 2.2%
Additional jobs created The number of people employed in the banking sector has decreased slightly compared
in other sectors with the end-2009 figure of 151,000. In spite of this, the increase in demand for goods and
by demand effects services was such that employment in other sectors rose by 15% within the space of two
years. These figures show that a robust Swiss economy is reliant not only on a strong bank-
ing sector as a source of demand but also on a high-performance workplace as a source of
Bi-directional interconnectivity, see BAKBASEL (2011).
16 The importance of the Swiss banking sector – SBA – August 2012
Cuts in banking jobs Generally speaking, this interconnectivity means that, per 100 bank employees, indirect ef-
affect other sectors fects create 115 extra jobs in other sectors. The major importance of the banking sector for
disproportionately the rest of the economy will also apply if jobs are cut in the near term: for every 100 jobs
that are cut in the banking sector, 115 are lost in other sectors. The prevailing framework
conditions in the banking sector, such as cost disadvantages due to certain taxes or to com-
pliance with more stringent regulatory requirements for banks in Switzerland, will trigger
consequences in other economic sectors that even outweigh those in the banking sector.
Spillover effects further The figures in tables 3-2 and 3-3 underestimate the value added and employment effects in
enhance impact of banking other economic sectors that can ultimately be attributed to the banking sector, since they
sector do not include the supply-side effects on other economic sectors. They also do not take
account of positive externalities. The banking sector contributes to Switzerland as a centre
of knowledge through its high level of education and training; cooperative over research
enhances the international appeal of Swiss universities; network effects and clusters en-
rich other industries. For example the tourism industry and watch and jewellery businesses
benefit from wealthy private banking clients who combine their visit to the bank with an
extended stay or luxury purchases.
The importance of the Swiss banking sector – SBA – August 2012 17
Banking remains a key In spite of the setbacks suffered during the crisis years, banking remains one of the key sec-
sector of the economy tors of the Swiss economy. It continues to make a significant contribution to gross value
added and is inextricably linked to the other economic sectors. The other sectors benefit
from the banks in several ways. On the one hand, as a provider, they generate inputs for
the banking sector or offer consumer goods and services to bank employees. On the other
hand, business benefits from the banking sector’s role as a network sector, which means
access to credit is easy and interest rates are lower than in other countries. Multinational
companies have numerous specific services at their disposal.
„Made in Switzerland“ is In return, banks in Switzerland benefit from the good reputation of Swiss industry. Were it
a stamp of quality not for the „Made in Switzerland“ stamp of quality shaped by the engineering and watch
industry, the banking sector may not have grown to the size it is today. Both business and
the banking sector are reliant on good framework conditions. However, regulatory tighten-
ing in the wake of the financial crisis added to the pressure already placed on the Swiss
banking sector by falling margins. To be competitive, a financial centre requires sensible and
appropriate regulation, which can only be developed through banks and the authorities
working together in dialogue. In light of the interconnectivity, it is important they compete
as a united front against international locations, but given the new political realities, this is
also an imperative.
18 The importance of the Swiss banking sector – SBA – August 2012
• Swiss Bankers Association
PO Box 4182
T +41 61 295 93 93
F +41 61 272 53 82
www.swissbanking.org Swiss banking sector – SBA – August 2012
20 The importance of the