Ms. Christine Hohl
Partner

Christine Hohl is a partner and a member of the Banking & Finance practice group in the Zurich office of Loyens & Loeff. She focuses on financing transactions, including acquisition finance, asset-based finance, project finance, real estate finance as well as debt issuances, securitisations and financial restructurings. Her clients include financial institutions, agents, large corporates and investors.

Prior to joining Loyens & Loeff, Christine worked at another leading Swiss law firm as well as in the London office of a large international law firm. Christine is Swiss and UK- qualified.

Mr. Florian Willi
Associate - Attorney at Law

Florian Thomas Willi is an associate and a member of the Banking & Finance practice group in the Zurich office of Loyens & Loeff. He specialises in financial regulatory matters, including licensing procedures of financial institutions, collective investment schemes, asset management, banking law, fintech matters and anti-money laundering as well as finance transactions, financial restructurings and securitisations.

Mr. Nicolas Kluckert
Associate - Attorney at Law

Nicolas Kluckert is a junior associate and a member of the Banking & Finance practice group in the Zurich office of Loyens & Loeff.

Key developments & the latest trends in Switzerland

Inflation, the economy & interest rates

In 2024, the global economy has remained resilient, declining inflation has improved consumer confidence and monetary policies in most major economies have eased.

Global GDP increased by 2.3% in 2024 and inflation stood at 4.2%, down from 6.8% in 2023. The OECD expects global GDP to grow by 3.3% in 2025 and 2026 and rates of inflation to reduce to the 2% central banks’ target.¹OECD (2024), OECD Economic Outlook, Volume 2024 Issue 2, OECD Publishing, Paris, https://doi.org/10.1787/d8814e8b-en.

While inflationary pressures began to subside in 2024, policymakers remained cautious in the face of geopolitical tensions, resulting commodity price volatility and economic uncertainty. The U.S. Federal Reserve delayed rate cuts until mid-year, reducing rates three times by December to 4.5%. The European Central Bank began easing earlier and, by year-end, had lowered its deposit rate to 3.15%.

In Switzerland, GDP increased by 0.9% in 2024 and is expected to grow by 1.4% in 2025 and 1.7% in 2026. The rate of inflation was 1.1% in 2024, well within the Swiss National Bank (SNB)’s target range of 0% – 2%, and a further drop to around 0.3% is currently anticipated for 2025. The SNB has reduced its policy rate incrementally in 2024 from 1.75% in January to 0.5% in December.

Market performance

Swiss capital markets

After 2023 had seen the lowest trading activity on the SIX Swiss Exchange (SIX) in over a decade, in 2024, SIX recorded a trading turnover of CHF 1,186.59 billion which represents a 13.4% increase from the previous year. Transaction volume increased by a moderate 4% but strong growth could be seen in the EFT and structured products segments with turnover up by 31% and 12.8%, respectively.²B1G Numbers 2024: Key Figures from SIX Swiss Exchange

While 2024 only saw two IPOs in Switzerland, Galderma’s CHF 2.286 billion placement (including over-allotment option) in March was one of the biggest in Europe and the largest in Switzerland since 2017. In November, Sunrise, a spin-off of Liberty Global, listed its Class A shares on the SIX at an opening price of CHF 44.75, resulting in a market capitalization of around CHF 3.2 billion. In addition, existing issuers raised around CHF 2.3 billion via capital increases.

On the debt capital side, there were 453 new bond listings, raising a total of CHF 104 billion, exceeding the CHF 100 billion threshold for the third year in a row but down from CHF 116 billion in 2023 and CHF 114 in 2022. The number of outstanding green, sustainability, sustainability-linked and social bonds traded on the SIX increased from 136 in 2023 to 175 in 2024.

M&A activity

After a 25% drop in M&A transactions in Switzerland in 2023, the market had high expectations for 2024. While, in the first nine months of 2024, transactions in North America increased by 13%, reaching a total value of USD 958 billion, and the value of European M&A increased by 14% to a total of USD 353 billion, with a remarkable 131% increase in the UK, 111% in Sweden, 68% in the Czech Republic and 29% in France, the value of Swiss M&A transactions decreased by 31% in the same period, alongside a 25% decrease in Italy, 34% in Austria and 52% in Germany.³The Early Signs of an M&A Industry Recovery | BCG

Predictions for 2025 were again optimistic in light of

declining inflation, lower interest rates and recovering

valuations and about USD 2.1 trillion in uncalled capital in

the hands of private equity firms. Significant M&A activity

had been expected in particular in the technology, healthcare and financial sectors, all of which are strongly represented in Switzerland.

However, at the time of writing, instead of the “Trump

bump” anticipated at the end of last year, tariff raises and

policy uncertainty from the new US administration have led

to falling stock markets and the lowest number of deal

announcements in more than a decade.

Swiss banking sector – Challenges & optimism

In March 2024, the SNB cut interest rates earlier than expected and was the first major central bank to do so. At the same time, it significantly raised the minimum reserve requirement on its current account for domestic banks and reduced the amount from which deposits earn the full interest rate. These measures are expected to considerably affect interest income of Swiss banks and 77% of banks surveyed for the EY Banking Barometer 2025 anticipate their interest margins to fall in the next two years. While the disappearance of Credit Suisse has reportedly led to an increased demand for corporate financing solutions from other Swiss banks, only slightly fewer than half of these banks seem to have been able to translate this into higher margins.⁴Banking Barometer 2025 – Balance | EY – Switzerland

In addition, as a consequence of the takeover of Credit Suisse as well as international developments (including sanctions against Russia and a closer cooperation between FINMA and other supervisory authorities generally), the Swiss Financial Market Supervisory Authority (FINMA) is strengthening its supervisory instruments and monitoring activities and a stricter interpretation and enforcement of existing and new regulatory requirements is expected (see further below, in particular, on Too-Big-to-Fail Regulation, AML/CFT and Various other FINMA Initiatives).

A positive side effect of declining interest rates, at least from the perspective of Swiss banks, is a continued rise in property prices in Switzerland. The value of mortgage collateral, which in 2024 made up around 77% of the loan portfolio of Swiss banks, thus continues to increase while mortgage default rates are expected to further decrease. Similarly, two-thirds of the banks surveyed by EY do not expect SME credit defaults to increase, despite a rather challenging outlook for the European industrial sector.

AI continues to gain momentum among Swiss banks and is expected to present both opportunities, in particular, in process automation and compliance, and challenges, notably in relation to regulatory requirements and risk management, mainly data protection.

And while the importance of ESG continues to increase, driven by international regulatory requirements, most notably, reporting obligations and increased action against greenwashing, sustainability appears to have entered the mainstream with sustainable investments in particular having lost some of their significance for the banks surveyed reflecting an apparent decrease in customer demand (see further below on ESG and Greenwashing).

Key Regulatory Developments

Too-Big-to-Fail Regulation

In the wake of the Credit Suisse crisis, Switzerland is considering several new too-big-to-fail (TBTF) regulatory initiatives.⁵Most recently, in December 2024, the Parliamentary Investigation Commission published a report in which it examined the management of federal authorities in the context of the Credit Suisse crisis. Although the commission found no misconduct by the authorities and acknowledges that they prevented a global financial crisis in March 2023, it demands improvements to the TBTF legislation and points out the slow progress in developing such legislation. The Swiss Federal Council has already acknowledged the commission’s report, responded to its recommendations in a separate report, and will take them into account for the revision of the TBTF regulation. Following the publication of the report “Lessons Learned from the Credit Suisse Crisis” by FINMA in December 2023, the Swiss Federal Council released an associated report on banking stability in April 2024. In its report, the Swiss Federal Council analysed the existing TBTF regulations, focusing on actions needed to bolster the resilience and stability of systemically important banks. As a result, it proposed 22 immediate measures and seven additional ones to enhance the current TBTF framework. Key proposals include stricter regulatory requirements for corporate governance and responsible risk management, increased capital requirements, enhanced liquidity support potential from the SNB and improved resolution planning for crisis situations. To implement this strategy, the Swiss Federal Council will first approve regulatory adjustments through ordinances, followed by the preparation and submission of legislative changes to the Swiss Parliament.

Financial Market Infrastructures, Derivatives and Market Abuse

In October 2024, the consultation period for the proposed amendments to the Financial Market Infrastructure Act (FinMIA) concluded. The Swiss Federal Council will now draft a revised version of its proposal for submission to the Swiss Parliament which is expected still this year. These amendments are extensive and will affect various areas, inter alia, financial market infrastructures (such as payment systems, central securities depositories and trading venues), derivatives trading and transaction disclosure rules. A brief overview of the proposed amendments is set out below.

Several adjustments are being proposed to prevent the failure of systemically important financial market infrastructures. Such rules include additional capital requirements (going- and gone-concern capital) as well as an improvement of the rules on stabilisation and resolution planning.

Currently, Swiss payment systems not operated by a bank require a FINMA license only if deemed necessary for the proper functioning of the financial market or the protection of its participants. The proposed amendments aim to provide clarity by establishing thresholds set by reference to transaction volumes set out in the implementing ordinance. These thresholds will determine when a payment system operator must obtain a FINMA license. Foreign payment systems will continue to be able to provide their services cross-border into Switzerland without requiring authorisation.

With respect to derivatives trading, the proposed rules for determining counterparty classification will be aligned to the EU rules. Whether a non-financial counterparty is classified as large or small shall be calculated based on the average of the aggregated gross month-end positions for the previous twelve months in the relevant outstanding OTC derivative transactions per derivative category. This replaces the method based on the average gross position, calculated on a rolling basis over a 30-business-day period. Further, small financial counterparties (NFCs-) will benefit from simplified reporting obligations. Under the current rules, after a transition period ending on 31 December 2027, NFCs- must report derivatives transactions entered into with foreign counterparties. This reporting obligation will be removed under the proposed amendments. Further, a simplification of the rules of substituted compliance is being proposed.

Regarding the disclosure of shareholdings, the new rules propose, inter alia, to raise the lowest disclosure threshold for shares listed on a Swiss trading venue from 3% to 5%. Additionally, it is being proposed to introduce a new requirement for issuers of securities listed on a Swiss trading venue, as well as persons acting of their behalf, to keep an up-to-date insider list (i.e. a list of persons who have access to inside information).

The suggested amendments would also include the obligation to publish ad hoc notifications and disclose management transactions in FinMIA. These obligations currently form part of the regulations of the relevant trading venue (e.g. the SIX). The proposed transfer of responsibility to FINMA has been heavily criticised by the market as the existing SIX model is perceived as proven and effective.

AML/CFT

In response to the revised recommendations of the Financial Action Task Force (FATF) in March 2022 regarding transparency and beneficial ownership and in an effort to align with evolving international transparency standards, the Swiss AML/CFT regime will undergo a comprehensive overhaul. In May 2024, the Swiss Federal Council submitted the dispatch for the new Transparency Act of Legal Entities (Transparency Act) along with amendments to the Anti- Money Laundering Act (AMLA) to the Swiss Parliament. The amendments to the Swiss AML/CFT regime are expected to come into force in 2026.

The Transparency Act introduces a non-public federal register of beneficial owners of legal entities. The register is accessible to authorities and financial intermediaries to the extent necessary to fulfill their due diligence obligations under the AMLA. The register will be managed electronically by the Swiss Federal Department of Justice and Police. Under the Transparency Act, it is the responsibility of the highest member of the executive body of the in-scope legal entities to register the beneficial owners in the register.

Further, the due diligence duties under the AMLA are extended to non-financial intermediary advisors (including e.g. legal advisors, attorneys and notaries) involved in risk-prone activities. These activities include, for example, the preparation or execution of transactions related to the acquisition or sale of real estate or the set-up, acquisition or sale of a company. Advisors involved in such activities must comply with KYC and CDD rules, which include identifying the contractual counterparty, verifying the beneficial owner, understanding and documenting the nature, purpose and background of the transaction or service and implementing internal controls and procedures for risk mitigation. Suspicious activities related to AML/CFT must be reported to the Swiss Money Laundering Reporting Office (MROS). Advisors will be supervised by self-regulatory organisations (SROs).

Innovation through Introduction of the L-QIF?

The Limited Qualified Investor Fund (L-QIF) is a new fund category introduced with the revision of the Collective Investment Schemes Act (CISA) in December 2021. Designed exclusively for qualified investors, the L-QIF is exempt from the usual authorisation and approval requirements for funds. In January 2024, the Swiss Federal Council adopted the amended Collective Investment Schemes Ordinance, bringing the legal basis for the L-QIF into force on 1 March 2024.

The innovative impact of the L-QIF in the Swiss financial market remains to be seen. Although the L-QIF itself is not subject to FINMA supervision, its management must be handled by a FINMA-supervised institution. This generally allows for a quicker and more cost-effective set-up of Swiss collective investment schemes, thereby enhancing the competitiveness of Swiss financial products.

However, there are areas where a FINMA-authorised investment fund limited to qualified investors may offer more flexibility than an L-QIF. FINMA may exempt such funds from certain rules of the CISA if the protective purpose of the law is not compromised. This allows for tailor-made solutions and flexibilities that an L-QIF may not provide – since there is no authorisation procedure, FINMA cannot be approached for exemptions.

While there are domestic use cases (i.e. for Swiss-resident investors), the L-QIF remains relatively unattractive for non-Swiss resident investors due to restricted EU market access and the 35% Swiss withholding tax on distributed or accumulated investment income, unless the so-called “affidavit procedure” applies. Consequently, the potential use of the L-QIF for non-Swiss resident investors may be limited, making it less competitive compared to other foreign funds, particularly, Luxembourg products such as the RAIF (Luxembourg Reserved Alternative Investment Fund).

Small-Bank Regime

FINMA has recently expressed a positive view of the Swiss Small-Bank Regime (SBR). Over the past few years, banking regulations have become increasingly complex. Introduced in 2020, the SBR offers regulatory relief to small, highly liquid and well-capitalised banks. The SBR simplifies the calculation and disclosure of required capital and liquidity, thereby easing the regulatory burden on the relevant institutions. Currently, 54 small banks and securities firms benefit from these simplifications, representing a quarter of the institutions in the two lowest supervisory categories in Switzerland.

FINMA indicated that market entry costs for entities eligible for the SBR have decreased. For already licensed institutions, FINMA anticipates long-term regulatory easing as a result of the SBR. A recent survey revealed that many institutions no longer need to perform complex calculations to meet equity and liquidity requirements. However, the costly technological infrastructure for these calculations

had already been established and remains in use. Some banks further expressed a desire to continue using this information voluntarily, while others noted that adjusting existing systems and processes would incur significant costs. Therefore, the cost benefits of these simplifications will likely only be realised over time.

Other FINMA Initiatives

In 2024, FINMA has undertaken various other regulatory initiatives to further shape the Swiss financial market. A selection is outlined below.

The fully revised FINMA circular on the operational risks and resilience of banks, fintech-licensed entities, securities dealers, financial groups and financial conglomerates came into effect on 1 January 2024. This circular outlines the rules on the segregation of duties relating to risk management and internal controls, along with the corresponding supervisory practice. It takes advancing technological developments into account, particularly, in connection with information communication technology handling critical data and cyber risks. Further, the circular adopts the Basel Committee on Banking Supervision’s revised principles for the sound management of operational risks and new principles on operational resilience.

In July 2024, FINMA published guidance on the issuance of stablecoins, supplementing the existing guidelines on the regulatory framework for initial coin offerings. In recent years, stablecoin projects have gained significant traction in Switzerland. This guidance addresses financial regulatory matters, particularly, frequently asked questions regarding licensing requirements under the Swiss Banking Act (BA) and the CISA.

FINMA notes that many stablecoin issuers in Switzerland use default guarantees from banks, which means that they do not require a banking license from FINMA. Instead, they only need to be affiliated with a self-regulatory organisation as a financial intermediary. To protect depositors, FINMA has established certain minimum (technology-neutral) requirements for the applicability of the exception for default guarantees.

Additionally, FINMA highlights the increased risks related to AML/CFT in connection with stablecoin projects. Given their typical use as a means of payment, the AMLA is almost always applicable.

In September 2024, FINMA published a draft circular on the consolidated supervision of financial groups with a consultation period until November 2024. The circular is set to be implemented in July 2025 and formalises FINMA’s established practices regarding the consolidated supervision of banks, fintech-licensed institutions (also known as “banking license light”) and securities firms.

FINMA has the authority to subject financial groups to consolidated supervision, which is crucial for assessing the stability of institutions within a group structure. This oversight is essential for effective prudential supervision, particularly, in evaluating group-wide risks and implementing appropriate measures. The circular outlines the scope of regulatory consolidation and the rules applicable throughout the group.

The draft circular also notes that, in exceptional cases, specific risks may be addressed through preventative measures rather than consolidated supervision. For example, if adequate consolidated supervision by a foreign authority is lacking, FINMA may impose ring-fencing measures to isolate the Swiss institution from the foreign financial group. These measures are implemented when risks can be effectively mitigated in this manner, essentially disconnecting the foreign financial group lacking adequate consolidated supervision and the financial institution with its headquarters or effective management in Switzerland.

In December 2024, FINMA released a guidance on governance and risk management for AI applications in supervised financial institutions. This guidance outlines best practices for identifying and mitigating AI-related risks through appropriate measures. This supplements FINMA’s earlier guidance in its 2023 Risk Monitor, where FINMA addressed the core challenges in connection with the use of AI, such as governance, reliability, transparency,

explicability and non-discrimination.

ESG and Greenwashing

In response to the rejection of the so-called “Responsible Business Initiative”, EU-style ESG reporting and due diligence requirements were introduced in the form of new provisions included in the Swiss Code of Obligations which entered into force on 1 January 2022, with the first reports published in 2024 for the 2023 financial year. The reporting requirements apply to Swiss-domiciled public interest companies (including banks, insurance companies and securities firms) which, together with their controlled companies in Switzerland and abroad: (i) have at least 500 full-time employees on annual average and (ii) assets in excess of CHF 20 million or revenue in excess of CHF 40 million in two consecutive years.

The Ordinance on Climate Disclosures, which entered into force on 1 January 2024, requires in-scope companies to report on their climate risks in line with the recommendations of the Task Force on Climate- Related Financial Disclosures for the first time in this year for the 2024 financial year. In December 2024, the Swiss Federal Council opened a consultation on amending the ordinance in order to adopt it to the latest international developments. The consultation will last until March this year.

In light of the more extensive reporting obligations introduced at EU level by the European Corporate Sustainability Reporting Directive under which in-scope companies have to report for the first time this year, the Swiss Federal Council had also opened a consultation process in June 2024 on potentially stricter sustainability reporting requirements for Swiss companies. The consultation closed in October 2024. As a next step, the Swiss Federal Council will submit an adjusted proposal to the Swiss Parliament.

With respect to combatting greenwashing, new and refined self-regulatory provisions have been adopted by the Swiss Bankers Association, the Asset Management Association Switzerland and the Swiss Insurance Association which reflect many of the recommendations of the Swiss Federal Council, including a definition of sustainable investment objectives and an independent audit requirement. These self-regulatory provisions will enter into force, with transitional periods, by January 2027. Given this progress and the EU’s ongoing amendments to the Sustainable Finance Disclosure Regulation (SFDR), the Swiss Federal Council has decided to refrain from introducing legislation to combat greenwashing in the financial sector at this point. This will be re-assessed once the EU publishes further amendments to the SFDR but by the end of 2027 at the latest.

On 1 January 2025, the Federal Act on Climate Protection Targets, Innovation, and Strengthening Energy Security entered into effect, solidifying Switzerland’s pledge to achieve net zero emissions as per the Paris Climate Accord. Financial institutions will need to implement decarbonisation plans for their direct and indirect greenhouse gas emissions and can opt in to voluntary bi-annual climate compatibility assessments.

New legislation to combat bankruptcy abuse

In March 2022, the Swiss Parliament passed the Federal Act on Combating Abusive Bankruptcy which contains amendments to several laws, namely the Swiss Code of Obligations, the Debt Enforcement and Bankruptcy Act, the Criminal Code and the Swiss Federal Act on Direct Federal Taxation. The purpose of the new rules, which entered into force on 1 January 2025, is to combat the abusive use of bankruptcy proceedings by preventing debtors from using such proceedings to free themselves from their financial obligations thereby damaging their creditors und unfairly competing with other companies.