Switzerland is a prosperous nation with a gross domestic product (GDP) higher than that of most

western European nations. In addition, the value of the Swiss franc (CHF) has been relatively
stable compared with that of other currencies.[3] In 2009, the financial sector comprised 11.6% of
Switzerland's GDP and employed approximately 195,000 people (136,000 of whom work in the
banking sector); this represents about 5.6% of the total Swiss workforce. Furthermore, Swiss
banks employ an estimated 103,000 people abroad.[4]

Swiss neutrality and national sovereignty, long recognized by foreign nations, have fostered a
stable environment in which the banking sector was able to develop and thrive. Switzerland has
maintained neutrality through both World Wars, is not a member of the European Union, and
was not even a member of the United Nations until 2002.[5][6]

Currently an estimated one-third of all funds held outside the country of origin (sometimes called
"offshore" funds) are kept in Switzerland. In 2001 Swiss banks managed US$ 2.6 trillion. The
following year they handled $400 billion USD less which has been attributed to both a bear
market and stricter regulations on Swiss banking.[7] By 2007 this figure has risen to roughly 6.7
trillion Swiss francs (US$6.4 trillion).

The Bank of International Settlements, an organization that facilitates cooperation among the
world's central banks, is headquartered in the city of Basel. Founded in 1930, the BIS chose to
locate in Switzerland because of the country's neutrality, which was important to an organization
founded by countries that had been on both sides of World War I.[8]

Foreign banks operating in Switzerland manage 870 billion Swiss francs worth of assets (as of
May 2006).[9]

[edit] Law and regulation

The Swiss Financial Market Supervisory Authority (FINMA) is a public law institution that
supervises most banking-related activities as well as securities markets and investment funds.[10]
Regulatory authority is derived from the Swiss Financial Market Supervision Act (FINMASA)
and Article 98 of the Swiss Federal Constitution.

The office of the Swiss Banking Ombudsman, founded in 1993, is sponsored by the Swiss
Banking Ombudsman Foundation, which was established by the Swiss Bankers Association. The
ombudsman's services, which are offered free of charge, include mediation and assistance to
persons searching for dormant assets. The ombudsman handles about 1,500 complaints raised
against banks yearly.[11]

[edit] Statutes

[edit] Banking law of 1934

The Swiss Parliament passed the Banking Law of 1934, which codified the rules of secrecy and
criminalizes violation of it. The secrecy provisions were not included in the first draft of the law,
which mainly concerned administrative matters such as bank supervision. The provisions, found
in Article 47(b), were added before passage of the bill due to Nazi authorities' attempts to
investigate the assets of Jews and "enemies of the state" held in Switzerland.[12]

[edit] Electronic payments

Swiss banks, as well as the post office (which handles some financial transactions) use an
electronic payments system known as Swiss Interbank Clearing (SIC). The system is supervised
by the Swiss National Bank and is operated via a joint venture.[13] SIC handled over 250 million
transactions in 2005, with a turnover value of 41 trillion Swiss francs.[14]

[edit] Major banks

UBS is one of the largest banks in the world (offices in New York City)

As of 2008, there are 327 authorized banks and securities dealers in Switzerland,[15] ranging from
the "Two Big Banks" down to small banks serving the needs of a single community or a few
special clients.

UBS and Credit Suisse are respectively the largest and second largest Swiss banks and account
for over 50% of all deposits in Switzerland; each has extensive branch networks throughout the
country and most international centres.

Due to their size and complexity, UBS and Credit Suisse are subject to an extra degree of
supervision from the Federal Banking Commission.[16]

[edit] UBS

Main article: UBS

UBS came into existence in June 1998, when Union Bank of Switzerland, founded in 1862, and
Swiss Bank Corporation, founded in 1872, merged. Headquartered in Zurich and Basel, it is
Switzerland's largest bank. It maintains seven main offices around the world (four in the United
States and one each in London, Tokyo, and Hong Kong) and branches on five continents.[17]

As of 2008, UBS had a net loss of CHF27.56 billion, a market capitalization of over CHF43
billion, and 77,783 employees.[18]

[edit] Credit Suisse

Main article: Credit Suisse

Credit Suisse is the second-largest Swiss bank. Based in Zurich, it was founded in 1856; its
market capitalization (as of 2007) is $95.2 billion, and the company has about 40,000 employees.
Credit Suisse Group offers private banking, investment banking and asset management services.
It acquired The First Boston Corporation in 1988 and merged with the Winterthur insurance
company in 1997; the latter was sold to AXA in 2006.[19] The asset management services were
sold to Aberdeen Asset Management in 2008 during the GFC

[edit] Central Bank

Main article: Swiss National Bank

Swiss National Bank headquarters in Bern

The Swiss National Bank (SNB) serves as the country's central bank. Founded by the Federal
Act on the Swiss National Bank (16 January 1906), it began conducting business on 20 June
1907. Its shares are publicly traded, and are held by the cantons, cantonal banks, and individual
investors; the federal government does not hold any shares.[20] Although a central bank often has
regulatory authority over the country's banking system, the SNB does not; regulation is solely the
role of the Federal Banking Commission.[21]

[edit] Private banks - Private bankers

The term private bank refers to a bank that offers private banking services and in its legal form is
a partnership. The first private banks were created in St. Gallen in the mid 18th century and in
Geneva in the late 18th century as partnerships, and some are still in the hands of the original
families such as Hottinger and Mirabaud. In Switzerland, such private banks are called private
bankers (a protected term) to distinguish them from the other private banks which are typically
shared corporations. Historically in Switzerland a minimum of Francs 1 million was required to
open an account, however, over the last years many private banks have lowered their entry
hurdles to Francs 250,000 for private investors.[citation needed]

[edit] Cantonal banks

There are, as of 2006, 24 cantonal banks; these banks are state-guaranteed semi-governmental
organizations controlled by one of Switzerland's 26 cantons that engage in all banking
businesses.[22] The largest cantonal bank, the Zurich Cantonal Bank, had a 2005 net income of
CHF 810 million.[23]

[edit] Banking privacy

Swiss bank secrecy does protect the privacy of bank clients; the protections afforded under Swiss
law are similar to confidentiality protections between doctors and patients or lawyers and their
clients. The Swiss government views the right to privacy as a fundamental principle that should
be protected by all democratic countries. While privacy is protected, in practice all bank accounts
are linked to an identified individual. Moreover, the bank secrecy is not absolute: a prosecutor or
judge may issue a "lifting order" in order to grant law enforcement access to information relevant
to a criminal investigation.[24]

[edit] Taxation

Main article: Taxation in Switzerland

Swiss law distinguishes between tax evasion (non-reporting of income) and tax fraud (active
deception). International legal assistance used to be granted only with respect to tax fraud. Under
pressure from the OECD and the G20, the Swiss government decided in March 2009 to abolish
the distinction between tax evasion and tax fraud in dealings with foreign clients. Switzerland
adheres to the international OECD standards with regard to administrative assistance in tax
matters (decision to take over the OECD Model Tax Convention, in particular Article 26) [25]

For Swiss taxpayers the distinction remains in place. Although not considered a crime and hence
not prosecuted in a penal court, tax evasion is a serious offence under Swiss tax law and hefty
financial penalties apply. In domestic prosecutions, banking secrecy may be lifted by court order
in cases of tax fraud or particularly severe cases of tax evasion.[26]

[edit] European Union

Swiss Capital Market in billion CHF, Data from a KPMG and Helvea Study[27]

Pressure on Switzerland has been applied by several states and international organizations
attempting to alter the Swiss privacy policy. The European Union, whose member countries
geographically surround Switzerland, has complained about member states' nationals using
Swiss banks to avoid taxation in their home countries. The EU has long sought a harmonized tax
regime among its member states, although many Swiss banking officials (and, according to some
polls, the public) are resisting any such changes.[28]

However Switzerland did not want to be seen as an obstacle to closer tax cooperation among EU-
member states and decided to support the international efforts to adequately tax cross-border
investment income. The retention tax agreed with the European Union (EU) in the taxation of
savings income agreement is a suitable and efficient means of doing so. The EU is committed to
eliminating existing loopholes in the system of taxation of savings income. Switzerland has
expressed to the EU its willingness in principle to correspondingly adjust the taxation of savings
income. Here it should be noted that Switzerland has adopted the OECD standard on
administrative assistance and that the Federal Council rejects the automatic exchange of
information.[29] Since July 1, 2005, Switzerland has charged a withholding tax on all interest
earned in the personal Swiss accounts of European Union residents.

Switzerland is not a member of the European Union but, since December 2008,[30] is a part of the
Schengen agreement.

[edit] United States

Swiss bank accounts cannot be opened without the holder signing a legal document asserting that
they have no outstanding financial obligations to the IRS. Despite this, Swiss banks have been
criticized for improperly shielding individuals practicing tax evasion.
In January 2003, the United States Department of Treasury announced a new information-
sharing agreement under the already extant U.S.-Swiss Income Tax Convention;[31] the
agreement was intended to facilitate more effective tax information exchange between the two
countries.[32] However, Swiss policy has continued to come under international criticism, and in
March 2009 Switzerland agreed to renegotiate more effective tax cooperation with the United
States and other countries.[33]

[edit] Money laundering

There are several measures in place to counter money laundering. The Money Laundering Act
sets forth requirements of account holders' identification, and requires reporting of any
suspicious transactions to the Money Laundering Reporting Office.[34]

According to the CIA World Factbook, Switzerland is "a major international financial center
vulnerable to the layering and integration stages of money laundering; despite significant
legislation and reporting requirements, secrecy rules persist and nonresidents are permitted to
conduct business through offshore entities and various intermediaries..."[35] However,
Switzerland's cooperation in transnational financial issues has been praised by several major U.S.
officials. A Federal Bureau of Investigation anti-terrorism official noted that Switzerland was
one of several countries to participate in joint task forces targeting financing of Al-Qaeda
terrorist cells; a former Assistant Secretary of the Treasury praised Swiss cooperation and the
country's assistance in the finding and freezing of terrorist and Iraqi assets.[36]

[edit] Numbered bank accounts

Main article: Numbered bank account

Some bank accounts are afforded an extra degree of privacy. Information concerning such
accounts, known as numbered accounts, is restricted to senior bank officers, rather than being
accessible to all the employees of a bank. However, the information required to open such an
account is no different from that of an ordinary account; completely anonymous accounts are not
allowed by law. Should a criminal investigation take place, law enforcement has access to
information related to a numbered account in the same way it has access to information about
any other account.[37]

[edit] Swiss Banks and World War II

Several inquiries have been made into the conduct of Swiss banks during the Nazi Germany
period (1933–1945), especially regarding funds deposited by or allegedly stolen from victims of
the Holocaust. The campaign causing the highest outlays ($1.25 billion in 1999) on the part of
the Swiss banking industry as of 2009 was the World Jewish Congress lawsuit against Swiss
banks launched by Edgar Bronfman, president of the World Jewish Congress, in concert with US
Senator Alfonse d'Amato of New York.[38]

The audit run by the Volcker commission which resulted from this lawsuit cost CHF 300 million
and gave its final report in December 1999. It determined that the 1999 book value of all
dormant accounts possibly belonging to victims of Nazi persecution that were unclaimed, closed
by the Nazis, or closed by unknown persons was CHF 95 million. Of this total, CHF 24 million
were "probably" related to victims of Nazi persecution.[39] In addition the commission found "no
proof of systematic destruction of records of victim accounts, organized discrimination against
the accounts of victims of Nazi persecution, or concerted efforts to divert the funds of victims of
Nazi persecution to improper purposes." It also "confirmed evidence of questionable and
deceitful actions by some individual banks in the handling of accounts of victims".[39]

In response to the lawsuit, the Swiss government commissioned an independent panel of

international scholars known as the Bergier Commission to study the relationship between
Switzerland and the Nazi regime. It reached similar conclusions about the banks' conduct in its
final report,[40] and found that trade with Nazi Germany did not significantly prolong the war.[40]

[edit] International competition

See also: Offshore bank

With recent changes in the Swiss bank secrecy regime the assets held by foreign persons in
Swiss bank accounts declined according to data by the Swiss National Bank (SNB) by 28.1%
between January 2008 and November 2009.[citation needed] Other states, such as Singapore, have
attracted depositors seeking privacy and protection. Having taken steps to make its banks more
attractive, Singapore strengthened penalties for violators of bank secrecy (and now imposes
steeper fines and longer jail sentences for offenders), and modified its laws on trusts and
inheritance. Singapore is also now the location of Credit Suisse's international banking
headquarters.