Switzerland is a country well known for the success of its financial sector. Switzerland has claimed its dominion as one of the power financial centers globally. The growth of the Swiss finance and banking sectors began in Zurich in the nineteenth century. First, it was building and maintaining railroads. Investment capital's demand subsequently grew, and Alfred Escher was the first to try and supply the rising demand. In 1856, they formed the Swiss Credit Institution.

Switzerland was adept in providing comprehensive services in wealth management. These services were offered to both Swiss residents and foreigners. The clientele brought up the sector at a fast rate after the Second World War. The banking sector grew faster in the 1950s when the Swiss financial system became internationalized.

Two hundred fifty-three banks were operational in Switzerland as 2017 ended. In 2016 however, Switzerland had eight more banks. The eight banks that closed were international banks. The Swiss National Bank has categories by which it recognizes banks in Switzerland.

The categories are:
a. Big banks
b. Cantonal Banks
c. Foreign Banks
d. Raiffeisen Banks
e. Other Banking Institutions
f. Stock Exchange Banks
g. Regional and Savings Banks
h. Private Banks

The banking sector has been presented with ample opportunities yet faced significant challenges. The industry is thus in dire need of an economic framework that is favorable for creating more advantages and protecting the claims the sector already has. Some of the challenges that the banks in Switzerland face include the following:
i. Constant rise in regulatory costs.
ii. Prolonged periods of accruing negative interest rates.
iii. Brexit has fueled legal and political uncertainties.
iv. Tensions in international trade.
v. Need for structural realignment due to industry digitalization and margin regressions.

Analysis of the Financial Performance

Despite the challenges, the banks have stepped up to try and maintain some level of sustainability. This has been portrayed by analytics on various aspects of the industry:

a. The Net Income

The banks registered a slight decrease in the aggregated net income. There was a 0.1% decrease in the 2017 analysis, which recorded a CHF62.5 billion operating net income. Interest-earning businesses had a slightly more significant reduction in their balance sheet income. As a result, a 0.6% decrease was registered in the CHF 24.0 billion income.

The interest-earning business enormously contributed to the income share despite registering a decrease. On the other hand, service and commission businesses contributed CHF 21.7 billion to the aggregated income, a 4% increase. The trading business, on the other hand, registered the most significant increase of 25.4%.

The banks in Switzerland registered an aggregated profit of 9.8 billion, a 24% increase. This was a comparison between 2017 and 2016. In addition, taxes worth 2.2 billion were paid by the banks.

b. Balance sheet totals

Credit volume has risen over the past few years, and assets have undergone various market developments. The results of these two factors have been reflected in the aggregated balance sheet total of Swiss banks. As a result, Swiss banks witnessed a 4.8% in CHF 3,249.4 billion generated in 2017 compared to CHF 3,100.8 billion in the preceding year. The Swiss banks that recorded the most significant increase in balance sheet totals in decreasing order include:
I. Big banks with an increase of over CHF 100 billion.
II. Cantonal banks recorded an increase of over CHF 20 billion.
III. Raiffeisen Banks with an increase of over CHF 10 billion.
IV. Other banking institutions registered an increase of over CHF 3 billion.
V. Savings and regional banks did not fall far off with a CHF 2 billion increase.
VI. Foreign banks reached an increased balance sheet total of over CHF 1 billion.
VII. Private banks recorded the lowest increase with a little over CHF 0.3 billion increase.

c. Credit Volume

When the minimum exchange rate on the euro was lifted, and the negative interest rates were introduced, Swiss banks played a significant role in financing and lending Swiss bank accounts. Mortgage loans, for example, claim the lion's share in Swiss banks' credit volumes. As a result, a steady increase in mortgage loans registered a 31% increase, equivalent to CHF 309.6 billion.

d. Wealth Management

Switzerland claims more than a quarter of the global market share in cross-border asset management and private banking. It leads the world with a record of CHF 7291.8 billion in assets under its management. Institutional customers are the most significant contributors to the number of support under the control of Swiss banks. Private investors are the most critical contributors to assets under the management of Swiss banks. These clients are both domestic and foreign.
These assets are expected to grow steadily until 2021 with an annual rate of about 3 or 4%.

e. Employment

There was a significant decrease in the number of jobs created by banks from 2016 to 2017. The 93,554 people employed by banks in 2017 were 7,822 less than those in the previous year. The comparison between 2018 and 2017 also registers a decrease.

The regulatory requirements imposed on the banks created a need for structural realignment. However, most people within the banking sector think that the employment levels will register an increase.

Impacts on the society

The financial services from the banking system have largely helped Switzerland and its people in many sectors. The following are some of the impacts of the Swiss banking sector on the country, its residents, and investors:

1. The Economy

CHF 12 billion was contributed by Swiss banks alone in 2015 to the Swiss economy in Zurich. This was about 8% of the total. Despite the various economic challenges that Switzerland faces, the financial sector has, time and again, proven to be stable.

2. Employment

In Zurich alone, providers of financial services, including insurance companies and banks, have employed 10% of the people in the region. This totals about 90,000 jobs. In 2017, Swiss banks alone employed more than 93,554 people.

3. Education and training

Swiss banks and other providers of financial services have invested in quality education and training opportunities for young people. This is to ensure that they have quality assurance in the skill of their employees. In Zurich alone, the banking sector offers more than 2,500 young people vocational training. This includes:
a. Offering apprenticeships in both commercial and IT fields
b. Introducing banking to high school students.
c. Offering students internship opportunities.
d. Establishing training programs for university and college graduates.

4. Industrial Financial Partnerships

Small and large companies have been financial services clients from financial institutions in Switzerland. In Zurich alone, the aggregate total for loans granted is CHF 100 billion. Some of the financial services the Swiss banks offer to institutional Swiss bank account holders are:
a. Payment services
b. Opening and maintenance of simple current accounts.
c. Export financing
d. Support and advice on acquisitions and mergers.
e. Venture capital in support of new businesses and innovation.

5. Network and Infrastructure

The Financial system in Switzerland has been a necessary foundation for ultra-modern infrastructure both within the industry and externally. Such infrastructural developments include:
a. Electronic exchanges.
b. Custody and securities settlements.
c. Market data.
d. Debit and credit card processing.
e. Interbank transactions.

6. Social responsibility

Swiss banks have made considerable contributions to charitable organizations and foundations supporting education, culture, social development, and innovation.

Why Swiss Banks ?

Further development of the banking system and financial sector as a whole largely depends on the creation and implementing of solutions that are oriented toward the future.

Switzerland's banking sector is attractive, and many Swiss bank accounts, both domestic and foreign, have been created due to influences such as:

1) Political stability
2) Legal certainty
3) Economic stability
4) Moderate taxes
5) Stable currency
6) Premier services
7) Strong service culture