Business, Economics and Jobs

Swiss Banking Angst


100g golden bars engraved with the logo and name of the swiss bank UBS are pictured at a plant of gold refiner and bar manufacturer Argor-Heraeus SA in Mendrisio, southern Switzerland.


Sebastian Derungs

ASHEVILLE, NC — On February 3 of this year, the U.S. Department of Justice indicted Wegelin & Co., Switzerland’s oldest private bank, for assisting U.S. citizens to evade taxes. Only days before, the bank, in an effort to limit the damage of the coming indictment, sold its non-U.S. business to Raiffeisen, a larger Austrian-based bank. Thus ended 280 years of continuous operation for a bank that had counted among its clients a Napoleon Emperor.

For several centuries, Switzerland has been synonymous with private banking. And while the reality of Swiss banking has not always been quite as glamorous as its popular image, it is true that hundreds of billions of dollars in off-shore money – money deposited in Swiss banks by non-Swiss citizens – has made tiny Switzerland, with a population of less than 8 million, one of the world’s largest banking centers.

As demonstrated by the indictment of Wegelin & Co., however, the world seems to be catching up with the Swiss. The whole notion of off -shore bank accounts where wealthy elites, and the occasional despotic dictator, can hide their money, is under attack – and the attacks, in addition to creating legal problems for Swiss bankers, are causing the Swiss nation some cultural angst.

Indeed, the last couple of decades have been tough ones for the Swiss self- image. Long accustomed to being considered among the world’s good guys, Switzerland’s reputation has been undergoing a revision in recent years, and not one entirely to their liking.

In a very public series of lawsuits and diplomatic tussles during the 1990’s, Switzerland’s banks were sued over hundreds of millions of dollars in assets that the Nazis had stolen from the countries they had occupied during World War II. Even the Nazis, it turned out, appreciated a safe banking haven, and stashed their loot in Switzerland. With the Allies’ destruction of Nazis Germany, a large percentage of these hidden assets remained unclaimed.

The banks unsuccessfully attempted to invoke their bank secrecy laws to avoid the claims of the rightful owners and heirs.

Since that time the news has rarely been good for Swiss banks on the international stage. Currently, in addition to criminal indictments, the governments of the United States and Germany, looking to collect ever more tax revenue, have pressured the banks to turn over the records of thousands of U.S. and German citizens who hold off-shore bank accounts in Switzerland. This effort has been assisted by persons many of the Swiss consider criminals and traitors; among them bank employees who have given or sold information about alleged tax evaders to foreign governments. Once again the Swiss have tried to use their bank secrecy laws to avoid these requests; once again they are failing. The information has already been transferred to the U.S. government, in a highly encrypted fashion for now, with the Swiss government withholding the encryption key in a final effort to work out immunity for its banks and citizens.

More from GlobalPost: Telling Swiss secrets: A banker's betrayal

Swiss bankers are becoming a new breed of international pariahs. At a dinner I attended in Zurich recently, of the two bankers at the table, one said his employer would not allow him to travel in the U.S., for fear he would be held and questioned by the American authorities. The other stated that she was not allowed to take her laptop with her on trips to the U.S. because the Americans assert the right to examine the contents of any computer carried into the U.S. Simply put, the privileged world of secret Swiss banking no longer exists.

The Swiss themselves seem to be of two minds about this changed reality. Many resent it as the result of bullying by the bigger countries. They view what is happening as an attack on Swiss national sovereignty motivated by essentially bankrupt foreign governments’ desire to squeeze more taxes out of their citizens. .

A sizable portion of the Swiss, however, is happy to see outside pressure being used to change the ingrained culture of their society. They argue that the debate about the Swiss role in World War II and the attacks on the previously sacrosanct financial sector have helped bring to the surface unhealthy aspects of Swiss culture, including anti-Semitism and xenophobia.

The challenge for the Swiss in the 21st century is to fashion a new identity for themselves –beyond the image of being the world’s secret bankers and best chocolate makers. With an integration of three national languages and cultures, and an ultra- democratic, yet stable, form of government, they have always been something of an example for Europe. Stubbornly independent, they are not a member of the European Union and joined the United Nations only in 2002, but they have hosted more peace conferences and are home to more international aid and humanitarian organizations than any country its size. There is much the world can learn from Switzerland’s successes.

And about those beleaguered bankers, they still have much to recommend them. Swiss banks are among the world’s best run. Switzerland’s political and economic systems are among the world’s most stable. The Swiss Franc is increasingly seen as a safer haven than the U.S. dollar in times of crisis. All are the basis for a successful banking system.

But what has changed is the loss of a certain sense of privilege. For many years the Swiss, safe in their mountain fortress, and sitting on a disproportionately large share of the world’s wealth, have felt themselves immune from the harsher workings of history. They now have to face that history. The character and reputation of a future Switzerland depend on the outcome of that confrontation.

More from GlobalPost: Telling Swiss secrets: 222 billionaires

John C. Hunter, an attorney and former banker currently living in North Carolina, has just returned from a year’s residence in Zurich, Switzerland.