Clock ticks on Swiss banking secrecy … Many Swiss believe banking secrecy cannot be sustained … Switzerland is facing mounting pressure finally to abandon its long tradition of banking secrecy. The United States has already told the Swiss government it expects Swiss banks to provide the US authorities with automatic information about US clients. Now the European Union is demanding the automatic exchange of information too, a policy non-EU-member Switzerland will have difficulty avoiding if it wants access to Europe's financial markets. – BBC
Dominant Social Theme: Switzerland is finished from a bank secrecy standpoint – and that is as it should be.
Free-Market Analysis: The BBC is explaining why Switzerland will not offer bank secrecy anymore. It tells us that even the Swiss themselves do not believe in it anymore.
First the United States put enormous pressure on Swiss finance and severely damaged Swiss private banking, which had existed for centuries. Now the European Union is having a go.
The idea is to mandate additional client information – basically on demand, which flies in the face of Swiss tradition. In this article, Swiss secrecy is portrayed as something that ought to be done away with.
In fact, there is another view we will get to in a moment. But first, more from the BBC:
Giving up banking secrecy is likely to be a painful process for the Swiss. While other countries see the practice as a way to hide the ill-gotten profits of crime, corruption, or tax evasion, in Switzerland it is viewed as an honourable policy which illustrates the relation of trust between state and citizen …
The article goes on to explain that the banker-client relationship is thought of in Switzerland as similar to the relationship between a doctor and patient. This is not a good comparison according to the BBC, however, because the result of Swiss confidentially is tax evasion.
The article mentions Transparency International Switzerland, which lobbies for more transparent financial transactions. It also quotes law professor Philippe Mastronardi who, with a number of other Swiss academics, have recently published a "manifesto" on the subject.
The manifesto, according to the BBC, calls for an end to banking secrecy and quotes Mastronardi as saying the practice is unethical. "For me there is a very important principle, which is the rule of law, and principles of transparency and honesty, which are being violated by the use of the banking system in Switzerland."
Mastronardi's opinion may not be in the majority in Switzerland; however, it may be shared by some of Switzerland's most prominent bankers. The article quotes a leading banker, Michel DeRobert, as being eager to extend an olive branch.
"We cannot be at war with our neighbours on these issues, that is very clear. We see the world, the whole world, moving towards a single standard. If that's the case then obviously we will have to adjust to that standard."
Perhaps, as the BBC article concludes, Switzerland is indeed ready to accept the end of banking secrecy. But as mentioned previously there is another point of view – one that is becoming more prevalent in Switzerland.
In an article posted at Nestmann.com, financial publisher Mark Nestmann provides us with a different point of view. It is Nestmann's opinion that bank secrecy is evolving in Switzerland not vanishing. He cites a recent court case as evidence for this view.
The Swiss win a big victory for bank privacy … Late last month, a Swiss court sentenced Hervé Falciani, a former employee of HSBC's Swiss private banking arm, to a five-year prison term.
[While working for HSBC's] information technology department … he secretly downloaded the account details of more than 100,000 HSBC clients. He is alleged to have then sold this information to tax authorities in France.
While Falciani is out of the country and probably won't be repatriated any time soon to serve any of his sentence, the ruling is nonetheless notable. Nestmann tells us that "Falciani is considered a national hero for exposing wrongdoing at HSBC … [but] Switzerland insisted on prosecuting him for his data theft – and obtained a five-year conviction."
Switzerland has a big stake in reshaping bank secrecy, not jettisoning it. The country still holds a vast amount of wealth from outside its borders and Falciani's actions, if seen as tolerable, would have further damaged the Swiss reputation for confidentiality.
Nestmann now asks, "Is Swiss secrecy really dead?" and answers, "Only if you're determined to cheat the taxman or are trying to use funds of criminal origin to fund your account."
This is a different approach to be sure, but it is from Nestmann's point of view still a valid differentiator from, say, US banks where client data can be used for marketing purposes and even sold to other vendors.
Additionally, he points out, "If a US government agency wants a look at your domestic financial records, it doesn't need to show probable cause. It merely needs to issue a subpoena certifying that the records are relevant to a current investigation."
The Swiss have been behaving in a somewhat un-Swiss-like way of late. They decided not to back the Swiss franc with gold and are now said to find a "national basic income" to be attractive. Yet when it comes to bank secrecy, the BBC may be overstating the case.
Perhaps, as Nestmann indicates, the Swiss are reconfiguring bank secrecy rather than doing away with it entirely. In fact, Nestmann recommends that those who can afford it ought to consider, or reconsider, Swiss banking.
While bank secrecy is not so comprehensive as it once was, it is still a good deal stronger than in other places, and especially in the US. Additionally, having money in places other than the US (or Europe) provides a regional diversification that is prudent at a time when Western governments are becoming more intrusive and even confiscatory.