Banking in Switzerland

Banking in Switzerland dates to the early 18th century through Switzerland's merchant trade and has, over the centuries, grown into a complex, regulated, and international industry. Banking is seen as emblematic of Switzerland. The country has 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, which were used to protect assets of persons being persecuted by Nazi authorities, have also been used by people and institutions seeking to illegally evade taxes, hide assets, or generally commit financial crime. Controversial protection of foreign accounts and assets during World War II sparked a series of proposed financial regulations seeking to temper bank secrecy, but with little success. Switzerland has been one of the largest offshore financial centers and tax havens in the world since the mid-20th century. Despite an international push to meaningfully roll back banking secrecy laws in the country, Swiss social and political forces have minimized and reverted much of proposed rollbacks until 2017, when Switzerland agreed to automatically share bank account information of depositors not resident in Switzerland with foreign governments and their revenue services. This de facto constituted the end of banking secrecy for depositors who were not Swiss residents. Furthermore, since Switzerland ratified the FATCA agreement with the U.S., some Swiss banks have gone so far as to close accounts held by US citizens and to ban US citizens and U.S. lawful permanent residents from opening new accounts, even if they also hold Swiss citizenship or residency, because of concerns regarding their tax liability. Unlike Switzerland, the U.S. taxes its citizens regardless of whether they are resident in their home country or not. Banking secrecy remains in force for all residing in and taxable in Switzerland only. Disclosing client information has been considered a criminal offence since the early 1900s. Employees working in Switzerland and abroad at Swiss banks "have long adhered to an unwritten code similar to that observed by doctors or priests". Since 1934, banking secrecy laws have been violated at least by four people: Christoph Meili (1997), Bradley Birkenfeld (2007), Rudolf Elmer (2011), and Hervé Falciani (2014). As stated, banking secrecy has been de facto abolished for non-Swiss residents holding bank accounts since Swiss banks began practicing the automatic exchange of information (AEOI) with foreign governments and revenue services since 2017. 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. 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. Banking in Switzerland has been portrayed, with varying degrees of accuracy, in overall popular culture and television shows.