The Swiss National Bank headquarters, in Bern, Switzerland. (Photo by Baikonur via Wikimedia Commons.)

Katherine moved to Switzerland from Ohio in 2008 to be an au pair.

The United States was in the middle of its financial crisis and she figured “why not?” First order of business in Zurich was to get a bank account.

“I had gone to, I think it was, UBS the first time, and they had said that they didn’t offer any bank accounts to Americans who had less than $250,000,” she said. “My boyfriend, at the time, and I just laughed at that, like, ‘she has to have a bank account. She’s going to be living here.’”

Katherine was ultimately granted a young person’s account at UBS. Now, years later, the graphic designer and her husband are having account troubles again, trying to get a mortgage.

“We got so far along in the mortgage process that people were telling us it was a good time to buy, and then it was only literally right before we were going to sign the contract that we were finding out, ‘Wait a minute, she’s American, this is a red flag, this is a problem.’”

David Kuenzi, founding partner at Thun Financial Advisors, a Madison, Wisc., firm that helps Americans abroad, said he had heard similar stories.

“I’ve heard stories where, the client withdrawing money or doing a transfer was told, ‘Oh, your movement of money prompted us to do a review of your account and we realize you’re an American, and we want you to leave.’”

Kuenzi said Swiss banks are reacting to U.S. investigators trying to catch the rich in what is often vilified as a tax haven. But they are also reacting to American legislation called FATCA, or the Foreign Account Tax Compliance Act. It will enter into effect next year and requires foreign banks to automatically send the IRS information on American clients, presumably to more easily find tax evaders.

“To use the weight of your financial and political power to enforce, in an extraterritorial way, that banks around the world act as tax agents for the U.S. government is preposterous,” Kuenzi said.

Manuel Ammann, director of the Swiss Institute of Banking and Finance, said besides the possible legal problems, FATCA costs Swiss banks money, leading most banks, with the exception of a few large or specialized ones, to dump American clients.

“Banks have become increasingly aware of the fact that having U.S. clients often means to be in non-compliance with U.S. regulations, and banks are becoming increasingly risk averse in that sense,” he said.

The Swiss bank, as thought of in American mythology, as a place to stash large sums of money, probably won’t change all that much for the super-rich — in the short term. Most of the assets now affected are relatively small savings or investment accounts and mortgages.

But Ammann said with more and more regulation, cross-border business will be increasingly tricky for banks to handle. And he said the entire banking industry is taking a hard look at the good and bad of its future.

“Swiss banks still have a number of advantages to them, like the innovation capacity at the service level,” Ammann said. “So from a competitive point of view I am not pessimistic with respect to Swiss banking in general, but the regulatory framework becomes increasingly difficult. ”

And that means no one – not regulators, bank officials, or clients – knows exactly what Swiss banking will look like when the dust finally settles.

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