Zurich’s comparative strengths and weaknesses

Legal certainty and political stability

Zurich’s first strength is legal certainty. Swiss law is codified, published in three official languages and applied by courts whose independence is not seriously questioned. Property rights are secure, expropriation without compensation is excluded by the Federal Constitution and the tax authorities are bound by the principle of legality. The chapters of Part I describe the Zurich Commercial Court, the prosecution of economic crime, anti-money-laundering compliance, sanctions and mutual legal assistance. Together they show a system that is strict but predictable. Predictability is precisely the quality that respondents to the GFCI survey rank first among the attributes of good financial regulation, ahead of speed, flexibility and quality.¹

The second strength is political stability in the Swiss sense, which rests on direct democracy, federalism and consensus. Direct democracy is sometimes seen abroad as a source of uncertainty, because citizens can vote on almost any question. In practice it has repeatedly confirmed the conditions on which the financial centre depends. On 30 November 2025 the voters rejected by 78.3 per cent an initiative of the Young Socialists that would have imposed a federal tax of 50 per cent on inheritances and gifts above CHF 50 million.² On 14 June 2026 they rejected by 54.79 per cent the popular initiative “No to a 10-million Switzerland”, which would have capped the resident population and could have required the termination of the free movement of persons with the European Union.³ Both results were watched closely by international clients and employers. Both confirmed that the Swiss electorate, whatever its concerns, tends to protect the foundations of economic openness when a concrete decision is put to it.

The limits of this strength lie in the speed of decision-making. Swiss legislation takes years, consultations are extensive and referendums can delay or overturn reforms. The debate on the capital requirements for UBS, discussed below, illustrates the pattern. What international competitors such as Singapore or Dubai can decide in months, Switzerland decides in years. For long-term clients this slowness is a form of protection against sudden changes. For firms that need rapid adaptation of the regulatory framework, for example in the field of crypto-assets and Digital Assets, it can be a disadvantage.

The franc, education and quality of life

The Swiss franc is both an asset and a burden. It is one of the few currencies that international investors regard as a safe haven, and its long-term strength has preserved the purchasing power of wealth booked in Switzerland over decades. The Swiss National Bank kept its policy rate at zero per cent at its assessment of 24 September 2026 and confirmed that it remains prepared to intervene in the foreign exchange market if needed to ensure appropriate monetary conditions.⁴ The strength of the franc raises the costs of the financial centre in foreign currency and reduces the value of foreign-currency assets when measured in francs. The decline in the foreign share of Swiss assets under management since 2015, noted above, is largely a currency effect. Part C of this volume traces the origins of the franc in the Federal State of 1848, and Part F describes its role as a refuge in the twentieth century.

Education is a further strength. The Swiss Federal Institute of Technology in Zurich (ETH) ranked eighth in the QS World University Rankings published in June 2026 and has held a place in the top ten for twelve consecutive years. It remains the best-ranked university in continental Europe, and the University of Zurich placed ninety-eighth.⁵ The chapter on the Polytechnikum in Part D and the chapter on artificial intelligence and the talent base in Part J show how these institutions supply the financial centre with engineers, mathematicians, economists and computer scientists. In an era in which banks and insurers are becoming technology companies, the proximity of a university of this rank is an asset that neither Dubai nor Geneva can match and that only Singapore and Hong Kong can approach in Asia.

Quality of life completes the picture. In Mercer’s Quality of Living ranking of December 2024, Zurich placed first worldwide, ahead of Vienna and Geneva. Mercer cited its outstanding public services, low crime, lively cultural scene and commitment to sustainability, while noting that housing and transport make it one of the most expensive cities in the world.⁶ For families who consider moving to Zurich with their family office or business, the combination of security, schools, nature and cultural life is often decisive.

Costs and labour

The other side of this quality is cost. In the Worldwide Cost of Living survey of the Economist Intelligence Unit for 2023, Zurich shared first place with Singapore as the most expensive city in the world, ahead of Geneva and New York, with the strong franc and the prices of groceries, household goods and recreation cited as the main factors.⁷ Salaries, office rents and the cost of housing for employees make Zurich one of the most expensive places in the world to run a financial business. Banks have responded by moving back-office and increasingly middle-office functions to lower-cost locations in Switzerland, Poland, India and elsewhere. The decline of banking employment in Switzerland by 2,345 positions in 2025, reported by the SBA, partly reflects this trend.⁸

Access to labour is the second constraint. Employees from the European Union and the European Free Trade Association benefit from the free movement of persons, but recruitment from outside Europe is subject to annual quotas. For 2026 the Federal Council kept the quotas for qualified workers from third countries at 8,500 permits, of which 4,500 are residence permits and 4,000 short-term permits, and set a separate quota of 3,500 for British nationals. It justified the decision with the need for planning security for companies, the low unemployment rate and the shortage of skilled workers. Up to September 2025 only 52 per cent of the third-country quotas had been used.⁹ The low utilisation suggests that the quotas are not a binding constraint in aggregate. For individual firms that need specialists from India, China or the United States at short notice, the procedure remains slower and more uncertain than in Singapore, Hong Kong or Dubai.

Access to the European market

The most important structural weakness of Zurich is the absence of access to the European internal market for financial services. The only bilateral agreement in the financial field, the insurance agreement of 1989, concerns the establishment of direct non-life insurers and leaves banking and investment services outside its scope.¹⁰ The package of agreements that Switzerland and the Union concluded in substance on 20 December 2024, initialled in May 2025 and signed on 2 March 2026, stabilises and extends the bilateral path in the fields of free movement, transport, technical barriers to trade, agriculture, electricity, food safety, health, research and education.¹¹ Financial services are not part of it. The Federal Council adopted its dispatch on 13 March 2026, and the package is now before Parliament, subject to an optional referendum.¹²

The Swiss Bankers Association has described the current state of affairs plainly. Outside specific bilateral arrangements, Swiss banks cannot actively provide cross-border services in the European Union and are limited to passive business at the initiative of the client. The association criticises the equivalence procedures of the Union as one-sided, inefficient and partly politicised. It advocates a model under which Swiss banks could register with a central European authority to obtain a passport, while remaining under the primary supervision of FINMA.¹³ No such arrangement is in prospect. On the contrary, the revised Capital Requirements Directive (CRD VI) will require non-EU banks to establish an authorised branch in each Member State in which they carry on core banking activities such as deposit-taking and lending with European clients from 11 January 2027. Reverse solicitation, services falling under MiFID II and intra-group business remain exempt, and agreements concluded before 11 July 2026 are grandfathered until they expire or are materially amended.¹⁴

The gap in market access has two consequences for international competition. It pushes Swiss banks and asset managers to hold their European business in subsidiaries in Luxembourg, Germany, Liechtenstein or elsewhere, which moves employment and value added out of Zurich. It also makes the Berne Financial Services Agreement with the United Kingdom all the more valuable, because it shows an alternative model of market access based on mutual recognition. For Zurich the combination of the package with the European Union and the agreement with the United Kingdom secures the general economic relationship with Europe, while leaving the European financial market largely closed. Zurich’s competitive strategy must therefore focus on clients outside the European Union, on wealthy European clients who seek Swiss services at their own initiative and on institutional business that can be structured through European vehicles.

The one-big-bank issue

Since the takeover of Credit Suisse by UBS in March 2023, Zurich has been the home of a single global bank whose balance sheet is large in relation to the Swiss economy. None of its main competitors faces a comparable concentration. London hosts several global banks and the branches of all major foreign institutions, Singapore has three large domestic banks, and Hong Kong relies on HSBC, Standard Chartered, Bank of China (Hong Kong) and the branches of mainland banks. Part G describes the collapse of Credit Suisse and the reforms that followed. For the international competitiveness of Zurich, the concentration has two faces. UBS gives the city the headquarters of the largest wealth manager in the world, with a global network through which clients from all continents reach Switzerland. At the same time, the fate of the financial centre and the solvency of the Confederation are more closely linked to a single institution than ever before.

The Federal Council’s response has been to require systemically important banks to back their participations in foreign subsidiaries fully with Common Equity Tier 1 capital. On 22 April 2026 it estimated that UBS would have to strengthen the capital of its parent bank by about USD 20 billion, which would bring its CET1 ratio to about 15.5 per cent, and allowed a transitional period of seven years.¹⁵ UBS has opposed the measures as extreme and harmful to its competitiveness. In September 2026 a member of the Council of States, Andrea Caroni, proposed to return the bill to the Federal Council and let the government regulate the matter by ordinance. The chamber nevertheless went on to decide the substance a week later.¹⁶ On 23 September 2026 the Council of States voted by 29 votes to 16 to require that 90 per cent of the backing of foreign participations consist of CET1 capital, allowing only ten per cent in additional tier 1 instruments.¹⁷ UBS estimated that this solution would require about USD 16 billion of additional capital and, together with earlier measures and the requirements linked to the acquisition of Credit Suisse, a total of about USD 33 billion.¹⁸

The debate matters for international competition in two ways. If the requirements are too lenient, the risk of another state rescue remains, and the reputation of Switzerland as a safe place for wealth could suffer again, as it did in March 2023, when the write-off of additional tier 1 bonds of Credit Suisse led to claims by foreign investors. If they are too strict, UBS may move parts of its business, or in an extreme scenario its headquarters, to another jurisdiction. Press reports in September 2026 indicated that the bank was once again weighing such options.¹⁹ The loss of the last global bank would change the character of Zurich profoundly. The financial centre would survive, because it rests on a broad base of private banks, cantonal banks, insurers, asset managers and service providers, although its links to global capital markets and its capacity to serve large corporate and institutional clients would weaken. The next chapter returns to this question in its scenarios for 2035.

Tax

Taxation is the field in which Zurich faces the most varied competition. For companies, the canton of Zurich has one of the higher effective rates among Swiss cantons, although it remains moderate by international standards after the reforms described in Part H. The neighbouring cantons of Zug and Schwyz offer considerably lower rates, and many holding companies and family offices with activities in Zurich are domiciled there. For individuals, Switzerland taxes income and wealth at progressive rates, but it levies no capital gains tax on private movable assets and, in most cantons, no inheritance tax on transfers to direct descendants. The canton of Zurich abolished lump-sum taxation for foreigners without gainful activity in 2009. Of the 201 persons taxed on this basis at the time, 97 left the canton, while the remaining taxpayers eventually paid CHF 13.8 million more in taxes than before.²⁰ A federal initiative to abolish the regime throughout the country was rejected by the voters on 30 November 2014.²¹

Compared with its international competitors, Switzerland occupies a middle position. Dubai and Abu Dhabi levy no personal income tax. Singapore and Hong Kong tax income at low rates on a territorial basis and levy no tax on capital gains or inheritances. The United Kingdom has abolished its non-dom regime and extended its inheritance tax to long-term residents, while Italy offers a fixed annual amount. Swiss taxation is therefore higher than in several competing centres, although it is stable, negotiable in advance through tax rulings and embedded in a dense network of double taxation agreements. International clients generally regard the stability of the Swiss system as more valuable than a marginally lower rate elsewhere, and the rejection of the inheritance tax initiative in November 2025 has strengthened this perception.

Notes

1. Z/Yen Partners, press release on GFCI 39 (n. above). ↩
2. SRF News, “Abstimmungen vom 30. November: Erbschaftssteuer scheitert klar”, 30 November 2025, https://www.srf.ch/news/abstimmungen-vom-30-november-erbschaftssteuer-scheitert-klar. Turnout was 43 per cent. Opponents had warned that the tax would drive very wealthy individuals and entrepreneurs out of Switzerland or deter them from moving there. ↩
3. EY Tax News, “Switzerland rejects initiative to cap its population at 10 million”, 15 June 2026, https://taxnews.ey.com/news/2026-1275-switzerland-rejects-initiative-to-cap-its-population-at-10-million. The alert notes the growing political sensitivity of immigration, infrastructure, housing and public services. ↩
4. VZ VermögensZentrum, “SNB holds key policy rate at 0%”, 24 September 2026, https://www.vermoegenszentrum.ch/en/stock-exchange-and-markets/news/snb-holds-key-policy-rate-0. ↩
5. Switzerland Global Enterprise, “ETH holds its position in the top 10”, June 2026, https://www.s-ge.com/invest/en/articles/news/eth-holds-its-position-top-10. EPFL in Lausanne ranked twenty-second. ↩
6. Mercer, “Zurich offers highest quality of living for international assignees according to Mercer’s 2024 Quality of Living City Ranking”, 3 December 2024, https://marketingpreview.mercer.com/about/newsroom/zurich-offers-highest-quality-of-living-for-international-assignees-according-to-mercers-2024-quality-of-living-city-ranking/. ↩
7. finews.asia, “Singapore Remains World’s Most Expensive City: EIU”, 30 November 2023, https://finews.asia/high-end/40492-singapore-remains-world-most-expensive-city-eiu. ↩
8. Swiss Bankers Association, Banking Barometer 2026, executive summary (n. above). ↩
9. Federal Council, press release on the maximum numbers for workers from third countries in 2026, 19 November 2025, https://www.admin.ch/de/newnsb/7HwBjdg5HpBA. ↩
10. FINMA, “International treaties”, https://www.finma.ch/en/documentation/legal-basis/international-treaties/, listing the Agreement of 10 October 1989 between the Swiss Confederation and the European Economic Community on direct insurance other than life insurance (SR 0.961.1). Federal Department of Foreign Affairs, Directorate for European Affairs, “Insurance”, https://www.europa.eda.admin.ch/en/insurance: the agreement grants reciprocal freedom of establishment for agencies and branches, entered into force on 1 January 1993 and does not cover life insurance, reinsurance or cross-border insurance services. ↩
11. Federal Department of Foreign Affairs, Directorate for European Affairs, “Package Switzerland–EU (Bilaterals III)”, https://www.europa.eda.admin.ch/en/package-switzerland-eu. ↩
12. Federal Department of Foreign Affairs, Directorate for European Affairs, “Dispatch on the Switzerland–EU Package (Bilaterals III)”, https://www.europa.eda.admin.ch/en/dispatch-swiss-eu-package. ↩
13. Swiss Bankers Association, “Relations between Switzerland and the EU”, https://www.swissbanking.ch/en/topics/market-access/relations-between-switzerland-and-the-eu. ↩
14. Loyens & Loeff, “New rules for Swiss banks serving EU customers under CRD VI”, https://www.loyensloeff.com/insights/news--events/news/new-rules-for-swiss-banks-serving-eu-customers-under-crd-vi/. The authors advise Swiss institutions to assess restructuring options such as non-bank lending vehicles, EU branches or EU subsidiaries before January 2027. ↩
15. Federal Department of Finance, press release of 22 April 2026, https://www.efd.admin.ch/en/newnsb/_9e8qd5sXEzLww7dK3H_9. The release states that systemically important banks should be able to sell foreign subsidiaries in part or in whole during a crisis without negative effects on the capital ratios of the parent bank. ↩
16. SWI swissinfo.ch, “Swiss lawmakers move to hand UBS decision to government”, 16 September 2026, https://www.swissinfo.ch/eng/swiss-lawmakers-move-to-hand-ubs-decision-to-government/92069581. ↩
17. SWI swissinfo.ch, “UBS left reeling as Swiss finance chief wins over lawmakers”, 24 September 2026, https://www.swissinfo.ch/eng/ubs-left-reeling-as-swiss-finance-chief-wins-over-lawmakers/92111519. The National Council is not expected to decide before 2027. ↩
18. UBS, “UBS statement on decision by Swiss Parliament’s upper house on banking regulation”, 23 September 2026, https://www.ubs.com/global/de/media/display-page-ndp/en-20260923-banking-regulation.html. The bank describes Swiss capital requirements as already among the most stringent globally. ↩
19. Newsquawk, “UBS (UBSG SW) is once again weighing a merger to relocate out of Switzerland, Semafor reports”, 24 September 2026, https://www.newsquawk.com/headlines/ubs-ubsg-sw-is-once-again-weighing-a-merger-to-relocate-out-of-switzerland-semafor-reports. SWI swissinfo.ch, “Swiss finance minister downplays talk of UBS relocation”, 26 September 2026, https://www.swissinfo.ch/eng/swiss-industry/keller-sutter-it-is-unlikely-that-ubs-will-relocate-abroad/92123855, quoting UBS chairman Colm Kelleher that the bank would have to give the matter thought if it were no longer competitive. ↩
20. SWI swissinfo.ch, “Kantone wägen den Wert der Pauschalbesteuerung ab”, 6 October 2014, https://www.swissinfo.ch/ger/business/kantone-waegen-den-wert-der-pauschalbesteuerung-ab/40810306. The article records 5,634 lump-sum taxpayers in Switzerland as a whole, most of them in Vaud, Valais, Ticino and Geneva. ↩
21. Swissvotes, vote no. 587, popular initiative “Schluss mit den Steuerprivilegien für Millionäre (Abschaffung der Pauschalbesteuerung)”, 30 November 2014, https://swissvotes.ch/vote/587.00: 40.8 per cent of voters in favour, which means rejection by about 59 per cent. ↩

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.