If Swiss banks were to cast off their usual discretion and make a marketing pitch these days, it might start off something like this:
Dear Potential Client,
While we would be delighted to open an account and manage your money for you, once you’ve complied with our anti-money laundering provisions, please be advised that we will no longer be able to help you avoid taxes back home, and in fact may soon start providing account details to your national tax authorities. Moreover,
if you are American, please stay away. We’ve been so beaten up by the Justice Department that we’d rather not take your money at all.
That may not sound like a compelling proposition, but it hasn’t scared off everyone—so far. In fact, according to the latest monthly statistics published by the Swiss National Bank, foreigners have been depositing a growing volume of assets into Swiss banks. The 45 billion Swiss Francs ($50 billion) invested in Swiss savings and deposit accounts at the end of March represent an almost 30% increase from a year ago.
Yet these strong numbers belie the existential angst among bankers in Zurich and Geneva. Switzerland is bowing to massive international pressure—regulatory, judicial and political—to clean up its banking system, and the big question is how it can remain competitive as a financial centre once it has done so. The fabled secrecy that Swiss banks used to provide—and which was a key to its attractiveness as a financial centre—has been cracked open and replaced by a more nebulous form of confidentiality and privacy, the full details of which still need to be hammered out in international agreements.
The US is leading the attack. After months of sparring with the US Justice Department, Credit Suisse, one of the two big Swiss banks, this week pleaded guilty to conspiring to aid tax evasion and agreed to pay a $2.6 billion fine. The bank was just the latest such case; in 2009 its cross-town rival UBS settled with the US government over similar accusations. Last year a much smaller bank, Wegelin & Co, went out of business after pleading guilty to helping Americans evade taxes. Other cases are under way.
Pressure is coming from elsewhere, too. Earlier this month, Switzerland marked a sea change in its thinking by agreeing to sign up to a new global standard on automatic tax information exchange. (The exchange requires governments to collect data about non-residents from financial institutions,