Zurich as a hub for DACH clients

The service providers

Zurich’s role in the DACH market rests on a concentration of service providers that neither Vaduz nor the Austrian cities can match. The private banks, the wealth management divisions of the large banks, the independent asset managers licensed under the Financial Institutions Act, the trust companies, the law firms and the tax advisory practices together form a professional community in which German, Austrian and Liechtenstein matters are handled daily. Many Zurich law firms maintain German-qualified lawyers or cooperate closely with firms in Munich, Frankfurt, Stuttgart and Vienna. The large audit and tax firms operate integrated DACH practices. Independent asset managers based in Zurich frequently manage portfolios held at Liechtenstein banks or insurance undertakings, and Zurich trustees administer Liechtenstein foundations and trusts together with their colleagues in Vaduz.

For the client, the value of this concentration lies in the ability to address several legal systems from one place. A German entrepreneur who moves to Zurich, as Chapter K.II has described, will typically need advice on German exit taxation under § 6 AStG, on the extended limited tax liability under § 2 AStG and on German inheritance tax under § 2 ErbStG, on Swiss income and wealth tax and on the structuring of his family wealth, possibly involving a Liechtenstein foundation and a Liechtenstein insurance policy. An Austrian family with a Privatstiftung and a daughter living in Zurich requires advice on Austrian foundation law, on the Austrian taxation of distributions and on Swiss taxation of the beneficiary. Because such patterns recur constantly, Zurich has developed the expertise to handle them. What limits the service in practice is the regulatory framework for serving clients across the border.

Cross-border banking and financial services into Germany

Swiss banks that wish to serve clients in Germany face the licensing requirement of § 32 KWG. Under the administrative practice of the Federal Financial Supervisory Authority (BaFin), a foreign undertaking requires a licence if it targets the German market in order to offer banking or financial services repeatedly and on a commercial basis to persons resident in Germany. Business that comes about on the initiative of the client does not trigger the licensing requirement, a principle known as passive freedom to provide services or reverse solicitation.¹ The Federal Administrative Court has confirmed BaFin’s practice in this area.² A Swiss bank that actively solicits German clients through visits, events or targeted advertising without a licence therefore commits an offence under § 54 KWG, which the German investigating authorities have pursued in connection with the cases described in Chapter K.I.

The KWG allows BaFin to exempt a foreign institution from the licensing requirement in individual cases if, in view of the nature of its business, the institution does not require supervision in Germany, because it is effectively supervised in its home state and the home authority cooperates satisfactorily with BaFin. The provision was long found in § 2 Abs. 4 KWG and is today cited as § 2 Abs. 5 KWG.³ Under the traditional exemption practice, however, business with private clients had to be conducted through the intermediation of a credit institution licensed in Germany or the EEA, which made the exemption of limited use for Swiss private banks.⁴

The breakthrough came from the ruins of the failed withholding tax agreement. The draft agreement of September 2011 had contained provisions on market access, and when the German Bundesrat rejected the agreement, the two governments preserved these provisions in a separate form. A memorandum of understanding on procedural aspects of cross-border financial activities, together with an implementing agreement between BaFin and FINMA, entered into force on 1 January 2014. It introduced a simplified exemption procedure under which Swiss banks could approach German clients directly without the intermediation of a German institution. In return, the exempted bank must comply with specified German provisions on investor and consumer protection, observe German anti-money laundering rules in its cross-border relationships and undergo an annual audit by a Swiss audit firm, whose report goes to FINMA and BaFin. BaFin may commission on-site inspections if it has concrete indications of violations.⁵ The simplified procedure is thus a German–Swiss arrangement of 2014, agreed in the course of the tax negotiations and implemented by the two supervisors, which operates within the general exemption power of the KWG.

The initial use of the procedure was surprisingly modest. In the summer of 2015, BaFin stated that not a single Swiss institution had yet been exempted under the new arrangement, a fact that observers explained by the reluctance of banks to subject themselves to German rules while their German client base was shrinking after the regularisation wave.⁶ In later years a number of Swiss banks obtained exemptions. In 2021, the procedure was interrupted over unresolved questions concerning reporting obligations and their compatibility with Article 271 of the Swiss Criminal Code, which prohibits acts on behalf of a foreign state on Swiss territory. After the authorities clarified the issues in December 2021, BaFin resumed processing applications.⁷

The third-country branch regime from 2027

The German exemption regime is now overlaid by a European development that will change the framework for Swiss banks in the entire DACH area. Directive (EU) 2024/1619, known as CRD VI, introduced Article 21c into the Capital Requirements Directive. From 11 January 2027, undertakings from third countries that wish to provide the core banking services of deposit-taking, lending and guarantees or commitments in a member state must in principle establish a branch there and obtain authorisation. Germany is implementing the directive through the Bankenrichtlinienumsetzungs- und Bürokratieentlastungsgesetz (BRUBEG), which transposes the requirements into the KWG. According to commentary on the German implementation, exemptions under § 2 Abs. 5 KWG covering core banking services face revocation, which significantly affects Swiss banks.⁸

The new regime contains exceptions that matter for Zurich. Services provided on the exclusive initiative of the client remain possible, as do interbank and intra-group transactions. Investment services and activities under the Markets in Financial Instruments Directive, together with closely related ancillary services, are excluded from the branch requirement. Contracts concluded before 11 July 2026 are protected by a grandfathering rule.⁹ For Zurich private banks, the practical consequence is a shift in emphasis. Portfolio management and investment advice for German and Austrian clients remain possible under the national regimes for investment services, while lending, in particular Lombard loans and mortgages for clients in the EU, will require either an EU branch, a subsidiary or strict reliance on client initiative. As at September 2026, banks are reviewing their service models and client documentation in preparation for the deadline.

Austria

The Austrian regime follows similar principles. Credit institutions from third countries that wish to conduct banking business in Austria on a commercial basis require a licence under the Bankwesengesetz. The Austrian Financial Market Authority treats the targeting of Austrian clients from abroad as the conduct of business in Austria. Business on the unsolicited initiative of the client is not covered. Unlike Germany, Austria has not concluded a specific arrangement with Switzerland comparable to the simplified exemption procedure, so that Swiss banks serve Austrian clients either on a passive basis, through a licensed Austrian or EEA subsidiary, or in cooperation with licensed intermediaries. For investment services, the Austrian Wertpapieraufsichtsgesetz transposes MiFID II, including the regime for third-country firms providing services to retail clients, which in principle requires a branch.¹⁰ The implementation of Article 21c CRD VI applies in Austria from the same date as in Germany.

In practice, this legal environment explains the continued importance of the Liechtenstein and Austrian subsidiaries described above. A Zurich-based group that wants to serve Austrian clients actively can do so through an EEA entity, whereas a Zurich bank without such an entity must rely on the client’s initiative and on the services that fall outside the licensing requirements. Advisers in Zurich therefore routinely examine, at the start of a new DACH relationship, which entity may approach the client, in which form and for which services. The Swiss side of the equation is governed by the Financial Services Act (FinSA), which applies to Swiss financial service providers serving clients abroad, and by FINMA’s expectations regarding the management of legal and reputational risks in cross-border business, a subject treated in Part F of this book.

Swiss law and the cross-border adviser

The regulatory boundaries apply to lawyers and trustees as well, although in a different form. A Swiss lawyer who advises a German client on Swiss law does not require a German licence, but legal advice on German law in Germany is subject to the Rechtsdienstleistungsgesetz, and representation before German courts requires admission as a Rechtsanwalt or recognition as a European lawyer. Swiss lawyers benefit from the Agreement on the Free Movement of Persons with the EU, which extends the European rules on lawyers’ services and establishment to Switzerland. In Liechtenstein, by contrast, the practice of law is reserved to lawyers admitted there, and the EEA rules apply to lawyers from the EU but not to Swiss lawyers, whose access is governed by specific bilateral arrangements.¹¹ The legal market in the DACH area is thus less integrated than the banking market, which reinforces the importance of cooperation between firms across the borders.

Notes

1. BaFin, “Merkblatt zur Erlaubnispflicht von grenzüberschreitend betriebenen Geschäften”, 1 April 2005, last amended 11 March 2019, https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Merkblatt/mb_050401_grenzueberschreitend.html. ↩
2. BVerwG, judgment of 22 April 2009, 8 C 2.09, https://www.bverwg.de/220409U8C2.09.0: a Swiss lender granting loans to German customers through the internet and German intermediaries conducts banking business in Germany requiring a licence under § 32 para. 1 KWG. The court upheld BaFin’s prohibition order. ↩
3. BaFin, “Merkblatt zur Erlaubnispflicht von grenzüberschreitend betriebenen Geschäften” (note above), which refers to the exemption under § 2 Abs. 4 KWG and states that institutions supervised by FINMA may dispense with certain documents in their application. Current commentary refers to the provision as § 2 Abs. 5 KWG, for instance Deloitte Schweiz, “Vereinfachtes Freistellungsverfahren für Schweizer Banken nach dem deutschen Kreditwesengesetz”, https://www.deloitte.com/ch/de/Industries/financial-services/perspectives/simplified-exemption-procedure-swiss-banks.html. ↩
4. Tobias Fischer, “Leitfaden für den Schweizer Private Banker mit deutscher Kundschaft”, Private, 2017, https://www.private.ch/media/docs/private/2017/04/de/40_Leitfaden-fu-r-den-Schweizer-Private-Banker.pdf. ↩
5. Tobias Fischer, “Der Marktzugang von Schweizer Banken nach Deutschland”, Private, 2015, https://www.private.ch/media/docs/private/2015/01/de/30_Der-Marktzugang-von.pdf. See also André-M. Szesny, “Der Weg nach Deutschland”, die bank, 26 February 2016, reproduced at https://www.heuking.de/de/news-events/newsletter-fachbeitraege/artikel/der-weg-nach-deutschland.html, who notes the concession that suspicious activity reports may be made exclusively to the Swiss authorities. ↩
6. finews.ch, “Offene Grenze nach Deutschland – doch keine Schweizer Bank geht hin”, 2015, https://www.finews.ch/news/banken/19075-banken-deutschland-marktzugang-frei-bafin-sif-freistellung-offshore. ↩
7. Deloitte Schweiz, “Vereinfachtes Freistellungsverfahren für Schweizer Banken nach dem deutschen Kreditwesengesetz” (note above). ↩
8. CMS Hasche Sigle, “CRD VI-Umsetzung: neue Anforderungen für Drittstaatenzweigstellen in Deutschland”, https://cms.law/de/deu/legal-updates/crd-vi-umsetzung-neue-anforderungen-fuer-drittstaatenzweigstellen-in-deutschland. ↩
9. KPMG Law, Miriam Bouazza, “CRD VI für Drittstaatenbanken: So bleibt Cross-Border-Geschäft in der EU noch möglich”, 30 July 2026, https://kpmg-law.de/crd-vi-fuer-drittstaatenbanken-so-bleibt-cross-border-geschaeft-in-der-eu-noch-moeglich/. ↩
10. Source as cited in the printed edition. ↩
11. The rules on cross-border legal services between Switzerland, Germany, Austria and Liechtenstein summarised here follow from the Agreement on the Free Movement of Persons (Annex III, Directive 77/249/EEC and Directive 98/5/EC), the German EuRAG and RDG and the Liechtenstein Rechtsanwaltsgesetz. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.