The Swiss Banking System

Abstract Historically, Swiss banks developed mainly to export domestic savings and act as financial turntables for foreign capital inflows. The first banking law to provide federal supervision of domestic banks was the Swiss Federal Act on Banks and Savings Banks (1934). Switzerland built its financial sector on the belief that self-regulation is the most effective way to manage financial entities. Nevertheless, federal supervision has become tighter in the twentieth century, turning Switzerland’s financial system into one of the world’s most closely regulated. Among the formidable challenges facing Switzerland’s banking system are increasing digitalization, gaining access to foreign financial markets, engaging in sustainable finance, changing anti-competitive tax rules, dealing with volatile interest rates, managing systemically important financial institutions, and protecting the financial system from paradigm-changing events.