"As to the banking industry not being competitive, each Canton operates is own locally applied tax system, and the government is known to be offering 100% backing to investments in many Canton banks."

I have been working and living many years in Switzerland. When I talk about Swiss banks I am not talking about the Cantonal Banks or cooperative banks, but about the big banks (UBS, CS) and the specialised small private banks and wealth managers that attract foreign deposits. From my own experience with the UBS I know that their fees are outrageous and that salaries in the banking sector (in all of Switzerland by the way) are extremely high as compared to European standards. They would not be able to compete under normal circumstances.

And from Headquarters you cannot live, particularly when also those HQ are often there for Bank secrecy reasons. Swiss agriculture is highly subsidized (up to 50-70%), so a collapse of the banking sector would be a total disaster, because that would allow Swiss Government not any longer to cross-subsidize agriculture.