Are we still a banking country?: This is how the end of CS affects Switzerland

Are regional employment centers (RAV) now overflowing with former CS workers? Is Switzerland no longer a banking country and is the top real estate market and tax authorities poaching top earners and good taxpayers from the financial sector?

Steady employment growth in the financial sector

Historical figures show that nothing much will change. They show that the banking center has experienced many earthquakes and that consolidation has been going on for years. For example, the number of banks has fallen from 450 to less than 250 since the 1980s.

But this does not mean that there are fewer “financiers” in Switzerland. This is unlikely to change with the end of CS. Many of the laid-off CS employees will likely find jobs at other banks, insurance companies or other financial service providers such as fund houses, or at over two thousand independent asset managers. The same situation existed in previous crises.

According to data from BAK Economics, the number of employees in the Swiss financial sector has not decreased in the last two decades, but has increased from almost 200,000 to 230,000. Employment by banks peaked in the 1990s. BAK Basel Economics estimates that the number of full-time equivalent jobs has fallen from 118,000 to 106,000 since the turn of the millennium. SNB’s banking statistics mention approximately 92,000 jobs.

The longer time series shows that neither the merger of the Bankverein with the Bankgesellschaft to form UBS in 1998 nor the financial crisis with the UBS emergency bailout in 2008 left a significant mark on the labor market.

Layoffs at banks were more than offset by employment growth in related industries. The group identified above as other financial service providers includes, for example, fund management, credit card companies and fin technology companies. They benefited from outsourcing some banking services.

The sharp decline in employment at banks in 2017 was almost entirely due to outsourcing at major bank Credit Suisse.

Insurance is more efficient

But insurers did not play a significant role as a safety net for laid-off bank staff. The number of employees has remained stable for years and is around 50,000 across Switzerland, according to BAK Basel Economics. In other words, there are still half of the bank employees insured.

But in terms of value creation, insurers have largely caught up. While the gross added value of banks has increased by 50 percent in the last twenty years, the added value of the insurance sector has doubled and reached 24 billion francs. When all insurance-related services such as insurance brokerage or claims calculation experts are included, the figure is almost 27 billion. Only 4 billion left for banks to catch up.

But this also means that insurance professionals are much more productive than bankers. BAK Economics estimates nominal workplace productivity in insurance companies at 472,000 francs per full-time position. For banks, the figure is just under 300,000. Reinsurers such as Swiss Re are the most efficient. At the same time, bank employees still earn significantly more on average than insurer employees.

The increasing importance of insurance is also reflected in the stock market.

Until 2018, CS and UBS were more valuable than the three largest insurers and reinsurers listed on Zwinglistadt. Today, the market value of Swiss Life, Swiss Re and Zurich reaches 104 billion francs, while the new UBS has only 81 billion francs.