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Verdict: How Swiss banks could be better for foreign residents

We reached out to our readers to ask them about banking in Switzerland - and how banks could get better. Here’s what they said.

Money - represented by colourful cash notes - from all across the world lying in a pile.
Plenty of international money finds its way to Switzerland, but what could Swiss banks do better for foreigners? Photo by John McArthur on Unsplash

Swiss banks are world famous for their shady regulations, vaults full of gold and questionable member list, but in reality banking in Switzerland is a different story. 

The dominance of a handful of powerful banks has seen Switzerland’s banking sector get a little stuck in its ways, although a new generation of smaller, more dynamic financial institutions is forcing everyone into a bit of a rethink. 

In October, 2021, we asked our readers about their experiences with banking in Switzerland. 

We also asked them which banks were best – and worst – for foreign residents in Switzerland. 

EXPLAINED: Which banks are best for foreigners in Switzerland?

One final question we asked our readers was how Swiss banks could get better. 

Here’s what they said. 

What do Swiss banks do well? 

Most of our readers said they were relatively happy with their bank, indicating that stability and reliability were two important characteristics of Swiss banks. 

Swiss banks are also making improvements in relation to e-banking, i.e. with improved internet platforms and app-based banking. 

Our readers also said that while it was hard to get by with English in some smaller banks, this was also improving. 

READ MORE: How to open a bank account in Switzerland

What can Swiss banks do better? 

Steve, from Zurich, told us that Swiss banks were conservative and slow to introduce improvements. 

“The pace of change is very slow. Contactless took ages to introduce as did moving away from Maestro.”

Speed seemed to be a frequent complaint, with Mikołaj saying he wanted “faster bank transfers, less documents on paper”.

Simon, who uses a cantonal bank, said internet functionality could be improved, with the app not working on non-Swiss mobiles. 

Eric, in Lausanne, highlighted the credit card system. 

“Credit Card system here is rubbish. Extremely high fees with no rewards.”

Nicholas said changes needed to be made to provide for easier access for Americans, although he acknowledged that this is largely to do with US rather than Swiss rules. 

“Local banks won’t touch Americans due to (American) regulations” he told us. 

READ MORE: Why are Americans being turned away from Swiss banks?

One major area highlighted by several readers was the high fees in Switzerland – most of which are only waived if you deposit seven figures or more into your account. 

Mikołaj said to avoid UBS as it was “absurdly expensive”. 

One American reader, Jeremy*, told us UBS told him he needed to deposit a minimum of CHF2 million in order for the bank to waive its high fees – an amount that he did not have. 

READ MORE: Which bank is best for Americans in Switzerland?

“All the banks charge annual fees and provide no interest to konto (account) holders. Yet, these very same banks report astonishing profits year-after-year.  There are no credit unions.”

“The people that appear to profit are the people that are already rich. Us average blokes cannot get ahead.”

Bob, from the Ticino region of Cademario, said the current mortgage rules were forcing the Swiss to rent rather than buy their own place. 

“Ease the mortgage rules. Young people are forced into renting rather than homeowning by the harsh requirements.”

Switzerland has the highest percentage of renters of any European country and is the only country in Europe where more than half of the population rent rather than own their place of residence. 

READ MORE: Why do so many Swiss prefer to rent rather than buy their own home?

Do you agree? Or do you have some other suggestions?

Please let us know at [email protected].

*Persons appearing with an asterisk had their names changed at their own request.

This report has been put together as a guide only and The Local has not received any juicy kickbacks from these banks, nor do we endorse one organisation over the other. 

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COST OF LIVING

EXPLAINED: How inflation is increasing housing costs in Switzerland

Property is not exempt from inflation. Here's how costs are on the rise in Switzerland.

EXPLAINED: How inflation is increasing housing costs in Switzerland

First, the (somewhat) good news: The inflation rate in Switzerland —  2.6 percent  — is significantly lower than in neighbouring France (5.4 percent) and Germany (7.8 percent), as well as throughout much of Europe.

But even with the relatively low inflation, prices of many consumer products have been rising, with economists forecasting further hikes.

READ MORE: Seven products that are becoming more expensive in Switzerland

While you might notice the impacts of inflation when you buy groceries, consumer goods, food and petrol, inflation is also making a mark on the housing market.  

How is the housing market impacted by this phenomenon?

The impact on housing is indirect, which can be likened to the ‘domino effect’ — as the price of construction materials derived from petroleum, such as plastic, have risen, so has the cost of newly built houses and renovation work on existing properties.

Rents and mortgages are also impacted, although there the mechanism may be a bit complex to understand by non-experts. 

As Vincent Leroux, president of SVIT Romandie, the Lausanne-based section of the Swiss Association of Real Estate Economics, explained to Tribune de Genève (TDG), the “central bank have a particular mission to control inflation”.

To do this, it has the option of raising its key rate. When it does, the interest rates of financial institutions follow and rise in turn. The purpose of the maneuver is to reduce the use of credit, and to slow down the level of consumption and the upward trend in supply prices. But, if interest rates go up, rents can go up – as can the interest cost of a mortgage. 

EXPLAINED: How to save on your mortgage in Switzerland

This is the general picture, but what happens if you are a tenant?

All tenants are, or will soon have to, pay higher rents, according to Pierre Stastny, a lawyer at The Swiss Tenants Association (ASLOCA) in Geneva.

The determining factor is when the lease was signed and what the reference rate — weighted average interest rate for mortgages in Switzerland, announced by the Federal Housing Office each quarter — was at the time.

Those who rented their properties at a time when the reference interest rate was low could see their rents increase by 3 percent, Stasny said.

Those who contracted a lease whose rent is indexed to inflation will also see their costs rise.

This is because “the lease law authorises landlords to add 40 percent of the inflation rate to the rent”, Stasny pointed out. “But if the lease is signed for five years or more and the contract contains an indexation clause, the landlord can then pass on to the tenant the entire inflation rate.

How are homeowners affected by inflation?

According to Stéphan Mischler, director of mortgage and real estate platform MoneyPark, it depends on whether you are a first-time buyer, whose mortgage loan is in progress, or non-first-time buyers, who have settled their mortgage.

The former group is most at risk, money-wise.

“With inflation, the ten-year fixed interest rates, which are most often chosen in Switzerland, have started to increase: they have doubled and currently vary on average between 1.8% and 2.5%, compared to around 1% a few months ago”, Mischler told TDG.

“As a result, this doubles the interest cost of a mortgage for those who are currently looking to buy their home or for those who have recently taken out a mortgage.”

However, current owners could also be affected if they have to renew their mortgage in the near future.

Logically, this chain of events will also have repercussions  on potential buyers, as they may not be able to afford higher mortgage rates.

Other housing-related costs have risen in Switzerland as well. For instance, energy, including gas and electricity used by households, will  take a bigger chunk out of an average family’s monthly budget.

READ MORE:  How Covid, Ukraine and energy costs are changing Swiss spending habits

What exactly is inflation and what causes it?

Simply put, it is an increase in the prices of consumer goods and services, causing some loss of purchasing power. In other words, while our wages mostly remained the same, the cost of living went up, and is expected to continue to increase for at least the foreseeable future.

This trend started in mid-2021, as world economies recovered from the Covid pandemic, and Switzerland rebounded better than many other countries. However, with many supply chains still disrupted and struggling to meet consumer demand, prices began to rise.

The situation has worsened since Russia’s invasion of Ukraine on February 24th, which also slowed down or shut down altogether the production and supply of some essential agricultural and energy products, leading to higher prices.

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