Switzerland: Financial Sector Stability Assessment; imf country Report 14/143; April 16, 2014

the Swiss banking secrecy laws. Fourteen Swiss banks are under investigation by the 
U.S. Department of Justice (DoJ). For those not yet under investigation, the U.S. authorities 
proposed non-prosecuting agreements (August 2013), with substantial fines (up to 50 percent of 
assets under management). Going forward, the new compliance requirements (U.S. Foreign 
Account Tax Compliance Act), the withholding tax on Swiss-based accounts being agreed with 
several European countries, and the expected automatic exchange of information among tax 
authorities may reduce the attractiveness of Swiss offshore accounts. 
25. The authorities should assess the systemic risk in private banking and ensure that the 
weakest ones run off smoothly. Systemic risk arising from future legal procedures by the DoJ, 
whether direct (impact on solvency) or indirect (reputational risk), needs to be quantified and 
buffered. The authorities should examine the possibility of similar follow-on initiatives by other 
countries, and develop a financial sector strategy to ensure a smooth consolidation of the sector. 
Some consolidation has already started. Several banks surrendered their banking license to focus 
purely on asset management, or merged into larger banking groups (e.g., Wegelin). 
5
It is hard to obtain consistent cross-country measures of private banking. In Switzerland, the greatest part of 
assets under management relate to private banking.

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SWITZERLAND
INTERNATIONAL MONETARY FUND
17 
Figure 6. Switzerland: Global Top 20 Banks by Assets Under Management
(In billions of U.S. dollars) 
Source: Scorpio Partnership, Global Private Banking Benchmark 2013 
FINANCIAL SECTOR RESILIENCE 
A. Banking Sector Stress Test 
26. Three adverse scenarios were considered (Table 2): first, a re-intensification of stress in 
the euro area periphery, accompanied by the resumption of “safe haven” inflows into Switzerland, 
triggering a reassessment of the existing exchange rate floor; second, a severe global recession, 
triggered by the disorderly unwinding of unconventional monetary policies (UMP), affecting global 
financial markets and the global economy; and finally, a correction in the domestic real estate 
market, emulating the conditions observed during the house price correction during the early 
1990’s.