Banking in Switzerland

Banking in Switzerland dates to the early 18th century through Switzerland's merchant trade and over the centuries has grown into a complex and regulated international industry. Banking is seen as emblematic of Switzerland and the country has been one of the largest offshore financial centers and tax havens in the world since the mid-20th century, with a long history of banking secrecy and client confidentiality reaching back to the early 1700s. Starting as a way to protect wealthy European banking interests, Swiss banking secrecy was codified in 1934 with the passage of a landmark federal law, the Federal Act on Banks and Savings Banks. These laws were used to protect assets of persons being persecuted by Nazi authorities but have also been used by people and institutions seeking to illegally evade taxes, hide assets, or to commit other financial crime.

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Controversial protection of foreign accounts and assets during World War II sparked a series of proposed financial regulations seeking to limit bank secrecy, but with little resulting action. Despite various international efforts to roll back banking secrecy laws in the country which were largely minimized or reverted by Swiss social and political forces, in 2017 Switzerland agreed to "automatic exchange of information" (AEOI) with foreign governments and their revenue services regarding information of depositors not resident in Switzerland.^[1][2] This constituted de facto the end of Swiss banking secrecy for depositors who were not Swiss residents.^[3] Furthermore, after Switzerland ratified the Foreign Account Tax Compliance Act agreement with the U.S.A., because of concerns regarding their tax liability (the U.S. taxes its citizens regardless of whether they are resident in the USA or not) some Swiss banks have gone so far as to close accounts held by US citizens, and to ban the opening of new accounts by US citizens and by dual US-Swiss citizens, including those deemed lawful permanent Swiss residents.^[4] Thus banking secrecy remains in force only for those residing in and solely taxable in Switzerland.^[5]

Disclosing client information has been considered by Switzerland a criminal offence since the early 1900s. Employees working in Switzerland and at Swiss banks abroad have "long adhered to an unwritten code similar to that observed by doctors or priests".^[6] Since 1934 Swiss banking secrecy laws have been violated to a major extent by only four people, namely: Christoph Meili (1997), Bradley Birkenfeld (2007), Rudolf Elmer (2011) and Hervé Falciani (2014).

The Swiss Bankers Association (SBA) estimated in 2018 that Swiss banks held US$6.5 trillion in assets or 25% of all global cross-border assets. Switzerland's main lingual hubs, Geneva (for French), Lugano (for Italian), and Zürich (for German) service the different geographical markets. It currently ranks number two behind the United States and on par with Singapore in the Financial Secrecy Index.^[7] The banks are regulated by the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank (SNB) which derives its authority from a series of federal statutes. Banking in Switzerland has historically played, and still continues to play, a dominant role in the Swiss economy and society. According to the Organization for Economic Cooperation and Development (OECD), total banking assets amount to 467% of total gross domestic product.^[7] Banking in Switzerland has been portrayed, with varying degrees of accuracy, in overall popular culture and television shows.

In 2023 Switzerland lost much credibility as a banking centre after the collapse of Credit Suisse, one of the largest Swiss banks, subsequently acquired by its Swiss competitor UBS, and due to the inept way the affair was handled by the Swiss National Bank.^[8][9][10]