According to an official report (see BBC article) the process of naturalisation in Switzerland is discriminatory and even racist.
Let's not forget that Switzerland is one of the most democratic countries in the world, because each of the 26 cantons is a parliamentary state of its own. In a country of 7.5 million residents (1/5 of which is made of foreigners), this means that the population is extremely close to their politicians. If we exclude foreigners, there is a parliament for 230,000 people in average. Even more democratic than Luxembourg !
In such a closely knit society, where dialects can be mutually unintelligible just on the other side of a mountain, it is normal that the opinion of local communities is so important. Therefore it is also natural that one would need the approval of that tiny local community where one is living to obtain citizenship. A place where everybody knows each others is utterly different from big impersonal cities where neighbours don't even recognise each others in the street, as is often the case in cities of over 1 million people. No such thing exist in Switzerland.
One cannot apply moral judgement universally without taking characteristics of each country and culture into account. In this case it is nonsensical to call the Swiss system racist when it is the essence of Switzerland and Swiss lifestyle itself.
BBC said:
Let's not forget that Switzerland is one of the most democratic countries in the world, because each of the 26 cantons is a parliamentary state of its own. In a country of 7.5 million residents (1/5 of which is made of foreigners), this means that the population is extremely close to their politicians. If we exclude foreigners, there is a parliament for 230,000 people in average. Even more democratic than Luxembourg !
In such a closely knit society, where dialects can be mutually unintelligible just on the other side of a mountain, it is normal that the opinion of local communities is so important. Therefore it is also natural that one would need the approval of that tiny local community where one is living to obtain citizenship. A place where everybody knows each others is utterly different from big impersonal cities where neighbours don't even recognise each others in the street, as is often the case in cities of over 1 million people. No such thing exist in Switzerland.
One cannot apply moral judgement universally without taking characteristics of each country and culture into account. In this case it is nonsensical to call the Swiss system racist when it is the essence of Switzerland and Swiss lifestyle itself.
About the second... it's not necessarily nonsensical (I'm not saying it isn't, just considering the structure of thinking separately from the specifics of Switzerland). In my opinion, a system which is deeply ingrained in a country's culture and lifestyle can still be racist. Under those circumstances, I would say that therefore the individual people (individual inhabitants of that country, members of that nation etc.) have mitigating circumstances that go some way (possibly a long way or even all the way!) towards explaining the reasons for specific racist behaviours they exhibit and / or views they hold. As the country / nation is made up of individuals that also explains widely-held views and elements of culture. However, I would not say that means those views or behaviours aren't racist. I believe there are objective standards by which you can look at something and say "That's racist behaviour", or "That system / procedure is racist". No matter how deeply ingrained in the culture it might be, it would still be racist. In fact, you could say that some of the most racist views are some of the most deeply ingrained in a particular culture! 
