OREANDA-NEWS. Because increasing taxable resources have triggered higher payments without actually generating corresponding revenues for the canton. Based on our base-case scenario projections, we anticipate surpluses after capital accounts in 2016-2019, indicating a structural emergence from past deficits. Together with various improvements that have been implemented in the areas of budgeting and financial policies, the achieved budgetary improvement also underpins our view of the canton's very strong financial management.

At the time of the withdrawal, we considered the canton to still have strong budgetary flexibility, since it could increase tax revenues while retaining competitive tax rates. Additionally, we think that the canton's economy, whichwe assessed as very strong in an international comparison, would continue to grow in line with the Swiss national average and also be able to weather challenging macroeconomic conditions.

The canton's free cash and liquid reserves had been decreasing over recent years, but would still fully cover maturities in 2016. Nonetheless, we anticipated limited borrowing needs, given the canton's budgetary improvement and our projection that the canton's tax-supported debt burden would increase to 14% of operating revenues by 2018, which is still very low in an international comparison. The cantonal bank, for which Schwyz also provides a statutory guarantee, was the canton's main contingent liability. However, the bank's strong risk and financial profiles mitigated the risk for the canton, in our view.


We assessed Schwyz's liquidity as exceptional, despite a decrease in liquidityreserves over recent years, taking into account the combination of an exceptional debt-coverage ratio and strong access to external liquidity.

With its free cash and liquid assets at the time of the withdrawal, Schwyz's debt-service coverage for the next 12 months was above 100%, in our opinion. Furthermore, like other Swiss cantons, Schwyz benefits from strong access to external liquidity in domestic capital markets.

Our Banking Industry Country Risk Assessment places Switzerland's banking sector in group '2' on a scale of '1' to '10' (with '1' denoting the lowest risk and '10' the highest risk; see "Banking Industry Country Risk Assessment:Switzerland," published Sept. 9, 2015, on RatingsDirect).


The stable outlook at the time of the withdrawal reflected our view that the canton's consolidation measures, including substantial revenue increases, would yield budgetary improvements over the next two years and that the canton's financial management would successfully stabilize the canton's debt burden relative to operating revenues.