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Everyday Economics: What are Swiss banks and how do they work?

Swiss bank accounts are attractive to depositors because they combine low levels of risk with very high levels of privacy.

The logo of Swiss bank Credit Suisse is seen at a branch office in Zurich, Switzerland July 28, 2016. (Reuters Photo/File)

A whistleblower has leaked information on more than $100 billion held in 30,000 accounts of Zurich-headquartered Credit Suisse, one of the world’s most iconic banks — a lot of which is suspected to be dirty money of human rights abusers, fraudsters, and businesspersons who have been put under international sanctions.

The database was given to the German newspaper Sueddeutsche Zeitung, which shared it with the Organised Crime and Corruption Reporting Project and 46 other news publications including The New York Times, The Guardian, and Le Monde.

The investigation refocused attention on Swiss banks and their famous, century-old culture of secrecy which is under pressure as countries around the world try to get their super-rich to pay legitimate taxes on their wealth.

Centuries of secrecy

Since at least the beginning of the 18th century, Geneva had become a favoured destination of French royalty and other European elites seeking discreet havens to stash their wealth, and in 1713, Swiss government authorities announced laws prohibiting bankers from giving out information about their customers. Thus began a powerful culture of silence and secrecy that went on to become the defining feature of Swiss banking.

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In 1934, Switzerland passed the Federal Act on Banks and Savings Banks, commonly known as the Banking Law of 1934 or the Swiss Banking Act. The best known part of the law, Article 47, made it a crime to reveal details or information of customers to almost anyone — including the government — without their consent and in the absence of a criminal complaint. Violators can get five years in prison; Article 47 lies at the heart of some of the most stringent banking secrecy laws anywhere.

As wealth became easily mobile across international borders, the safety and stability of Swiss banks, located in a peaceful, politically neutral country committed to discretion, presented an irresistable attraction for the super rich and others who did not want to answer questions about sources of their wealth. Depictions in films created popular images of long tunnels leading to underground vaults, and bank officials with an unwavering reputation for client confidentiality. James Bond’s dialogue in The World is Not Enough (1999) is quoted often: “If you can’t trust a Swiss banker, what’s the world come to?”

Safe and easy banking

Swiss bank accounts are attractive to depositors because they combine low levels of risk with very high levels of privacy. The Swiss economy is extremely stable, and the banks are run at very high levels of professionalism.


Almost any adult in the world can open an account in a Swiss bank. Opening an account is not difficult, and requires not much more than basic KYC, including a proof of identity such as a passport. A minimum balance is required, which varies with the type of account, and from bank to bank.

The patronage of international clients is critical to Swiss banks and to the Swiss economy as a whole. The Guardian reported that almost half of the 7.9 trillion Swiss francs ($8.59 trillion) of assets under management in Switzerland belong to foreign clients. The banking industry contributes a tenth of Switzerland’s GDP and a similar share of the country’s jobs. There are more than 240 banks in the country, but Credit Suisse and UBS control about 50% of all banking assets, The Guardian said.

Question of ‘black money’

“Black money” allegedly stashed away by Indians in Swiss banks is a political issue in India, and parties and political functionaries have often made promises to “bring it back”. Swiss authorities have maintained that they cooperate with the Indian government to fight tax evasion and fraud.


The two countries have had a system of automatic exchange of information in tax matters since 2018, under which detailed financial information on all Indian residents with accounts in Swiss financial institutions was provided for the first time to Indian authorities in September 2019.

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First published on: 22-02-2022 at 08:25:38 pm
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