Economic policy environment
After posting strong earnings in 2021, the banks in Switzerland were confronted with a drastically changed environment in the first half of 2022 that was dominated by Russia’s war of aggression against Ukraine, supply chain problems and pronounced inflationary tendencies.
Interest rate situation
In view of doggedly high inflation rates, the SNB, the US Federal Reserve (Fed), the European Central Bank (ECB) and other central banks have hiked their benchmark interest rates and mooted further tightening. This normalisation of monetary policy harbours macroeconomic risks.
Government debt has risen further around the world in the wake of the COVID-19 pandemic and is set to remain high in the medium term. The burden of higher interest rates is thus substantial in many countries.
After rejecting the institutional framework agreement with the European Union (EU), the Federal Council made it clear that it intended to pursue the bilateral approach. At the same time, negotiations on a financial services agreement between Switzerland and the United Kingdom (UK) are making progress.
In common with other sectors, banks are undergoing constant structural change, adapting their business models, processes and structures to reflect economic and social trends, new technologies and changing customer needs.
Regulation of the banks and financial markets plays a key role in the attractiveness and competitiveness of the financial centre. Switzerland is also among the best-placed countries in the third edition of the Global Financial Regulation, Transparency, and Compliance Index (GFRTCI).19
An attractive tax environment and effective compliance rules are key locational advantages for the financial sector. Alongside taxation of banks’ own activities, a major issue is regulations to ensure that customers comply with their own tax obligations.