by Andre Sanchez

It is known that Swiss private banking accounts have been available at least since 1685.  This is only nineteen years after the Great Fire of London, and only 65 years after the Pilgrim Fathers left Plymouth for America.

The first major step forward for Swiss private banking took place in the eighteenth century when Louis XVI appointed a banker as the director of state finance for France. This was Swiss banker Jacques Necker from Geneva, and the appointment made it clear that Switzerland was a country whose banks were to be trusted.  When the political state of neutrality of Switzerland was declared in the nineteenth century, its banks became even more trusted as being independent from the vagaries of governments and more attractive to those with money to invest.

During the nineteenth century there were many social and economic upheavals and developments in Europe that demanded corresponding changes in the banking systems. Large construction projects, such as railways and power networks, including electricity and gas supplies, required investment finance that only large banks could provide. The massive investment banks in Switzerland arose in the latter part of the century to finance these projects, and many of the private banks raised the capital required by offering shares to private investors.

While the new industrial banks that were formed met the needs of corporate finance, many smaller banking cooperatives sprang up to satisfy the requirements of the ordinary person. Several Swiss banks were founded during this period, and they appeared to operate without significant problems for some period of time. 

From then till the early twentieth century, not much has been recorded and Swiss banks appeared to operate normally through the conflicts of the eighteenth and nineteenth centuries, and its neutral position in the event of international conflict probably had a lot to do with this.  The secrecy associated with Swiss banks originated sometime between 1932 and 1934.  

The bulk of evidence points to 1934 as being the year that the Swiss Federal Parliament introduced the concept of secrecy in banking as being contained in federal law, and passed legislation that made violation of this secrecy a criminal offence.  The fact that this occurred in 1934, less than a year after Adolf Hitler became Chancellor of the Reich, leads to the belief that it was the Nazi requirement for secrecy of its own deposits that led to pressure being applied for the legislation to be expedited.

Nevertheless it is still part of Swiss law.  As an example of this privacy and secrecy in banking, tax evasion is not a crime in Swiss Law and a customer’s bank account information cannot be revealed in the event of a tax crime case. The only circumstance that requires a Swiss bank to reveal a customer’s details is if the customer has committed a crime elsewhere that is also illegal in Switzerland, and the proceeds of that crime is deposited in a bank in Switzerland.

Another view was that it was the French left that forced this Secrecy Act through, but whatever the reason for it, the secrecy of Swiss banks was henceforth secured. It is this secrecy, as perceived by those that required it, that laid the major foundation of the Swiss banking system as it is known today.

The history and experience of Swiss banks has led to the situation that if you want to open a Swiss bank account for maximum privacy, you should first establish an offshore company, then open an offshore account. You could set up a company in Nevis or the Caymans: either is fine for this. Open an account in the name of the company then you can use it as your own once you set up the permissions and passwords.

Swiss banks have come a long way since 1685, though one cannot help but wonder what the driving forces for the legendary secrecy were in the mid 1930s, especially in view of subsequent events and the deposits made towards the end of the Second World War.

The two major Swiss banks currently are Credit Suisse and UBS, formed by a merger between the United bank of Switzerland and the Swiss banking Corporation.  Both are headquartered in Zurich, but have branches throughout Switzerland and internationally.  In addition to these ‘big two’, there are Around 400 other banks licensed in Switzerland, many of which are foreign banks with licensed branches in Switzerland.

All are licensed with the Swiss banking Federal Commission, and have to abide by Swiss banking law.

Swiss Banking: Past and Present was originally published at http://www.globallifenow.com