The ranks of Switzerland’s prized finance sector are shrinking, as tighter regulation and industry consolidation force smaller wealth managers and private banks to close or merge.
As of last month, 1,570 financial institutions held a licence, according to the regulator’s public registers of portfolio managers and wealth advisers — a sharp drop from more than 2,000 before new rules came fully into force in 2022.
The number of private banks in Switzerland has also fallen from more than 100 a decade ago to just 82 today, according to figures from KPMG, which projects that figure could drop below 70 by 2030.
“The sector is not just consolidating because firms are weak — many deals include strong players on both sides,” said Christian Hintermann, a partner at KPMG. “But the overall trend is clear: fewer banks, larger institutions, and a financial sector that’s becoming leaner, more regulated, and more concentrated.”
Assets under management in Switzerland have continued to rise, albeit at a slower pace than emerging rival jurisdictions such as Singapore and Hong Kong. Overall, the number of banks including local lenders has also shrunk from 243 in 2020 to 230 at the end of last year.
New regulation has increased the cost and complexity of compliance, particularly for smaller firms, argue some experts. The Financial Institutions Act (Finia), which became fully enforceable in 2022, was intended to bring Switzerland’s fragmented wealth industry into line with global standards. It introduced licensing for portfolio managers and trustees, expanding supervision over smaller wealth-management firms for the first time.
“There are a lot of players managing under $100mn, and I don’t see how they survive,” said Sebastian Jeck, partner at Novum Partners, a Swiss wealth manager with $10bn in AUM. “I am certain there will be more consolidation.”
The end of banking secrecy and the rollout of international tax-transparency rules such as FATCA have also upended the business model that once made Switzerland a haven for offshore wealth. “It is no longer a place to hide money so many . . . no longer have a reason to exist,” said the head of a Zurich-based private bank.
Regulatory pressure intensified after the 2023 emergency takeover of Credit Suisse by UBS, which created a domestic behemoth with more than $3tn in assets under management.
“After Credit Suisse collapsed, there’s been a shift across the industry, including at [the regulator],” said Jay Bidermann, a partner at Zurich-based private bank Rahm & Co. “Regulation has become stricter, and for firms under $10bn in AUM, it’s now very difficult to survive.”
Now, that tightening is moving up the chain. The Swiss government and Finma have turned their focus to systemically important banks — particularly UBS, whose assets equal roughly three times Switzerland’s GDP — with new rules that could increase the amount of capital it needs by as much as $26bn under a strengthened “too-big-to-fail” (TBTF) regime.
The reforms also give Finma greater powers, from stronger early-intervention tools to an expanded ability to hold senior management accountable.
The timing contrasts sharply with moves elsewhere. As the Trump administration in the US pushes to relax financial-sector rules, and the EU and UK soften or delay Basel III implementation to protect competitiveness, Switzerland is heading in the opposite direction.
That divergence has prompted concern among bankers and lawmakers that excessive regulation could make Swiss banks less profitable and less competitive, while burdening smaller players that already face rising compliance costs.
“We have to ensure that the TBTF reform package doesn’t harm the competitiveness and ability especially of smaller banks in Switzerland to do business,” said Benjamin Mühlemann, co-president of the centre-right FDP, Switzerland’s main pro-business party.
In response to concerns about the TBTF reforms, regulator Finma said while others may be loosening requirements, its approach “reflects lessons from past events”.
“For institutions with simpler structures, such as smaller banks, the administrative burden is expected to be minimal. The goal is not to overburden these institutions, but to ensure that all market participants operate with sound governance and risk management,” it said.
Regarding Finia and its impact on smaller wealth advisers and managers, the regulator that more than 200 new applications have been submitted since the end of 2022 by firms entering the market, even as others have closed, merged or withdrawn.
“Finma is aware that the new requirements represent a challenge particularly for smaller institutions. For this reason, Finma recommended at an early stage that institutions begin the licensing process in good time,” it said.
The compliance burden has nonetheless deterred new entrants and squeezed existing players who fear what new rules could mean for the industry.
“Regulation is a selling point, especially for international clients,” said Jamie Vrijhof-Droese, managing partner of WHVP, a wealth management firm for US clients. “But it has to be balanced with the realities of doing business.”
Additional reporting by Martin Arnold in London and Josh Franklin in New York