A Brief History of Swiss Banking

Swiss banking over 300 years

Zurich and Geneva are the main hubs of Swiss economy, with Zurich being responsible for around a third of the wealth and a quarter of jobs within the city. Although Switzerland has its lack of natural resources, it makes the most of what its got and has become stable and prosperous by producing goods with strong value. For example, Rolex, Proctor & Gamble and – who could possibly forget? – Swiss chocolate.

Aside from the chocolate, the beautiful mountainous views and popular ski resorts, Switzerland has a lot to offer. For those who want to keep their banking activities top secret, Switzerland is known as a financial safe haven. Regulation by civil law means that customers of the bank can put forwards complaints against any bank that doesn’t maintain client confidentiality. This has resulted in clients being protected because they cannot be prosecuted for information that has been divulged.

It all began over 300 years ago when Kings of France had the need for such a high degree of secrecy in their banking and borrowing of loans. It was carried forward through the years and became a safe place for people to reside their money after fleeing the revolution.

The Swiss Franc (CHF) has also always been the go-to currency in a crisis.

However, the modern day notoriety of some of the supposed ‘clients’ could include a strong list of mobsters, dictators and tax cheaters. This is due to the Banking Act of 1934, which allowed Switzerland to ultimately overcome the great depression and the stock market crash of 1929 by allowing the clientele of the banks to keep their banking activity private. But this has also meant a lot of corruption over the years, including the riddance of money and gold that was transferred from Jewish families over to Swiss banks from Germany, allegedly helping to finance their part in the war.

However, it is not all bad. After World War II, the USA, UK and France agreed, called the Paris Agreement of 1946, that countries that remained neutral during the war would transfer the money recovered from the German allies to aid Nazi victims. When discussing the issue, Switzerland transferred over approximately 250 million Swiss Francs of gold into the Tripartite Gold Commission’s monetary gold pool. This meant that the UK, French governments and the US would waive claims against the Swiss banks’ connection to German gold over the war. In the years since, the heirless money that has been left in Swiss bank accounts during that period of time has gone to Jewish and refugee communities to help rebuild the lives of families who were victims of the war.

Due to such high involvement in fraudulent scandals, Swiss banks have come under fire and held a national referendum in 2008 to amend the constitution that allows the information and records within banks to be open to tax authorities. However, a staggering 73% of the country voted against this idea, but it was not swiftly forgotten. In 2009, shortly after the UBS scandal, where a Swiss national helped US citizens avoid taxes and defraud the US Internal Revenue Service, the law was amended so that non-Swiss clients of Swiss banks could be prosecuted for similar activities and limit tax evasion as much as possible.

Switzerland’s financial history is brief but remarkable. Withstanding wealthy kings’ orders, world wars and great scandals, the Swiss have got a lot to talk about (or keep to themselves, of course) regarding their financial economy. If you have any queries regarding your riches, please don’t keep it to yourself… Give our team a call today!