SWITZERLAND Law and Practice Contributed by: Shelby R du Pasquier, Patrick Hünerwadel, Valérie Menoud and Marcel Tranchet, Lenz & Staehelin
1. Loan Market Overview 1.1 The Regulatory Environment and Economic Background
1.4 Alternative Credit Providers Alternative credit providers (eg, specialised debt funds) have been increasingly active in the Swiss mar- ket, especially in international leveraged transactions. The “Swiss non-bank rules” (see 4.1 Withholding Tax ) are an element to be considered when structuring such transactions. As regards debt securities transactions in Switzerland, these are generally co-ordinated by banks (Swiss or non-Swiss) with a broader investor base than in the bank loan market. 1.5 Banking and Finance Techniques As mentioned in 1.4 Alternative Credit Providers , alternative credit providers have been increasingly active in the Swiss market during the past few years. There is an expectation that this trend may continue, partly as a result of the merger of Credit Suisse (which has historically been a significant participant in Swiss loan markets) into UBS. This consolidation is expected to lead to a somewhat lower level of available liquidity and a narrower range of products. The use of crowdfunding to finance projects has shown relatively stable growth over the past few years in Switzerland. Under current Swiss rules, crowdfund- ing is not subject to any specific regulatory require- ments. Similarly, crowdfunding platforms are not sub- ject to licensing requirements for the time being. Platform operators have to be careful, however, to comply with the traditional banking rules and structure their activities in a way that does not trigger a licensing requirement under banking laws. This could, under certain circumstances, be the case where an opera- tor has accepted deposits from the public. Platform operators’ activities are also generally subject to anti- money laundering regulations. 1.6 ESG/Sustainability-Linked Lending As is the case in other leading financial centres, ESG and sustainability-linked lending is a major topic in Switzerland and is a feature of many transactions, especially syndicated loan transactions and, albeit to a lesser degree, large bilateral loan transactions.
The lending market in Switzerland is well developed, with experienced participants (lenders, borrowers and advisers). The Swiss lending market has been sta- ble for many years now, including during the 2008 financial crisis, the COVID-19 pandemic, the war in Ukraine, and the acquisition of Credit Suisse by UBS. The Swiss market is largely in the hands of Swiss banks, but non-Swiss banks and alternative lenders (such as specialised debt funds) play an important role as well. The Swiss Financial Market Supervisory Authority (FINMA) is keen to ensure that lending is sustainable, and that the solvency of banks is not put at risk as a result of over-lending. FINMA monitors banks to ensure that they have sufficient capital to withstand changes in risk-drivers. 1.2 Impact of Global Conflicts The slowdown in global economic growth as a result of, inter alia, global conflicts and higher interest rates has also had a certain impact on the Swiss economy, but broadly the Swiss economy has remained stable. The Swiss loan market has also remained stable, and liquidity has not dried up. However, uncertainty over future economic growth in certain key markets glob- ally, political developments, and the future direction of inflation and interest rates continue to present risks and challenges to both lenders and borrowers. Of note, Switzerland has adopted sanctions that are, in principle, aligned with those adopted by the EU in response to Russia’s ongoing military aggression against Ukraine. 1.3 The High-Yield Market High-yield debt securities have been an increasingly popular means of external debt financing during the past few years. Large transactions, especially leveraged transactions, are frequently structured both with loans and high- yield debt. For Swiss withholding tax reasons, the notes’ issuer is often a non-Swiss entity.
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