Banking in Switzerland is characterised by stability, privacy and protection of clients' assets and information. The country's tradition of bank secrecy, which dates to the Middle Ages, was first codified in a 1934 law. All banks in Switzerland are regulated by Swiss Financial Market Supervisory Authority (FINMA), which derives its authority from a series of federal statutes.
As of 11 October 2008 ( 2008 -10-11 ) , the banking industry in Switzerland has an average leverage ratio (assets/networth) of 29 to 1, while the industry's short-term liabilities are equal to 260% of the Swiss GDP or 1,273% of the Swiss national debt.
Overview
Switzerland is a prosperous nation with a gross domestic product (GDP) higher than that of some larger western European nations. In addition, the value of the Swiss franc (CHF) has been relatively stable compared to that of other currencies. In 2003, the financial sector comprised an estimated 14% of Switzerland's GDP and employed approximately 180,000 people (110,000 of whom work in the banking sector); this represents about 5.6% of the total Swiss workforce.
Swiss neutrality and national sovereignty, long recognized by foreign nations, have fostered a stable environment in which the banking sector was able to develop and thrive. Switzerland has maintained neutrality through both World Wars, is not a member of the European Union, and was not even a member of the United Nations until 2002.
Currently an estimated one-third of all funds held outside the country of origin (sometimes called "offshore" funds) are kept in Switzerland. In 2001 Swiss banks managed US$ 2.6 trillion. The following year they handled US$400 billion less which has been attributed to both a bear market and stricter regulations on Swiss banking. By 2007 this figure has risen to roughly 6.7 trillion Swiss francs (US$5.7 trillion).
The Bank of International Settlements, an organization that facilitates cooperation among the world's central banks, is headquartered in the city of Basel. Founded in 1930, the BIS chose to locate in Switzerland because of the country's neutrality, which was important to an organization founded by countries that had been on both sides of World War I.
Foreign banks operating in Switzerland manage 870 billion Swiss francs worth of assets (as of May 2006).
Law and regulation
The Swiss Financial Market Supervisory Authority (FINMA) is a public law institution that supervises most banking-related activities as well as securities markets and investment funds. Regulatory authority is derived from the Swiss Financial Market Supervision Act (FINMASA) and Article 98 of the Swiss Federal Constitution.
The office of the Swiss Banking Ombudsman, founded in 1993, is sponsored by the Swiss Banking Ombudsman Foundation, which was established by the Swiss Bankers Association. The ombudsman's services, which are offered free of charge, include mediation and assistance to persons searching for dormant assets. The ombudsman handles about 1,500 complaints raised against banks yearly.
Statutes
Banking law of 1934
The Swiss Parliament passed the Banking Law of 1934, which codified the rules of secrecy and criminalizes violation of it. The secrecy provisions were not included in the first draft of the law, which mainly concerned administrative matters such as bank supervision. The provisions, found in Article 47(b), were added before passage of the bill due to Nazi authorities' attempts to investigate the assets of Jews and "enemies of the state" held in Switzerland.
Electronic payments
Swiss banks, as well as the post office (which handles some financial transactions) use an electronic payments system known as Swiss Interbank Clearing (SIC). The system is supervised by the Swiss National Bank and is operated via a joint venture. SIC handled over 250 million transactions in 2005, with a turnover value of 41 trillion Swiss francs.
Major banks
As of 2006, there are 408 authorized banks and securities dealers in Switzerland, ranging from the "Two Big Banks" down to small banks serving the needs of a single community or a few special clients.
UBS AG and Credit Suisse are respectively the largest and second largest Swiss banks and account for over 50% of all deposits in Switzerland; each has extensive branch networks throughout the country and most international centres.
Due to their size and complexity, UBS and Credit Suisse are subject to an extra degree of supervision from the Federal Banking Commission.
UBS
Main article: UBS AGUBS came into existence in June 1998, when Union Bank of Switzerland, founded in 1862, and Swiss Bank Corporation, founded in 1872, merged. Headquartered in Zürich and Basel, it is Switzerland's largest bank. It maintains seven main offices around the world (four in the United States and one each in London, Tokyo, and Hong Kong) and branches on five continents.
As of 2008, UBS had a net loss of CHF27.56 billion, a market capitalization of over CHF43 billion, and 77,783 employees.
UBS has used the slogan "You & Us" in their marketing communication. The slogan aims to highlight the firm's client-based approach. Source: UBS branding
Credit Suisse
Main article: Credit SuisseCredit Suisse is the second-largest Swiss bank. Based in Zürich, it was founded in 1856; its market capitalization (as of 2007) is $95.2 billion, and the company has about 40,000 employees. Credit Suisse Group offers private banking, investment banking and asset management services. It acquired The First Boston Corporation in 1988 and merged with the Winterthur insurance company in 1997; the latter was sold to AXA in 2006.
Central Bank
Main article: Swiss National BankThe Swiss National Bank (SNB) serves as the country's central bank. Founded by the Federal Act on the Swiss National Bank (16 January 1906), it began conducting business on 20 June 1907. Its shares are publicly traded, and are held by the cantons, cantonal banks, and individual investors; the federal government does not hold any shares. Although a central bank often has regulatory authority over the country's banking system, the SNB does not; regulation is solely the role of the Federal Banking Commission.
Private banks - Private bankers
The term private bank refers to a bank that offers private banking services and in its legal form is a partnership. The first private banks were created in St. Gallen in the mid 1700s and in Geneva in the late 1700s as partnerships, and some are still in the hands of the original families such as Hottinger and Mirabaud. In Switzerland, such private banks are called private bankers (a protected term) to distinguish them from the other private banks which are typically shared corporations.
Cantonal banks
There are, as of 2006, 24 cantonal banks; these banks are state-guaranteed semi-governmental organizations controlled by one of Switzerland's 26 cantons that engage in all banking businesses. The largest cantonal bank, the Zürich Cantonal Bank, had a 2005 net income of CHF 810 million.
Banking privacy
See also: Bank secrecySwiss bank secrecy does not protect private banking information; the protections afforded under Swiss law are similar to confidentiality protections between doctors and patients or lawyers and their clients. The Swiss government views the right to privacy as a fundamental principle that should be protected by all democratic countries. While secrecy is protected, in practice all bank accounts are linked to an identified individual, and a prosecutor or judge may issue a "lifting order" in order to grant law enforcement access to information relevant to a criminal investigation.
Taxation
Main article: Taxation in SwitzerlandSwiss law distinguishes between tax evasion (non-reporting of income) and tax fraud (active deception). International legal assistance is only granted with respect to tax fraud. In domestic prosecutions, banking secrecy may be lifted by court order in cases of tax fraud or particularly severe cases of tax evasion.
European Union
Pressure on Switzerland has been applied by several states and international organizations attempting to alter the Swiss privacy policy. The European Union, whose member countries geographically surround Switzerland, has complained about member states' nationals using Swiss banks to avoid taxation in their home countries. The EU has long sought a harmonized tax regime among its member states, although many Swiss banking officials (and, according to some polls, the public) are resisting any such changes.
Since July 1, 2005, Switzerland has charged a withholding tax on all interest earned in the personal Swiss accounts of European Union residents.
In 2001 and 2002, an amnesty was offered by the government of Italy in which taxes and penalties on repatriated funds were limited on funds repatriated from Switzerland; 30 to 35 billion euros worth of deposits were returned to
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