Avaloq, a banking software supplier, is set to create 500 jobs in Edinburgh.

The Swiss-based firm will recruit 20 staff in the next two months for the new Scottish development centre, hiring the rest over a five year period. It will also take on 75 graduates as part of the move.

The move will almost double the size of the company, which has 600 banking and IT specialists and serves over 75 banks including Nomura, Barclays Wealth and Coutts.

Avaloq chief executive Francisco Fernandez said Edinburgh was chosen because it was seen as the second most important financial centre in the UK.

"We decided three years ago to create a second site to reach our growth targets," he said. The "wealth of potential graduate talent available in Scotland and the number of universities offering excellent degrees in software engineering" had also played a part.

Scottish First Minister Alex Salmond said Avaloq's location decision was "testament to the high quality of Scottish education".

The graduate employees will be given a six-month training programme.