Have Swiss banks found a new religion?
They are now distancing themselves publicly from their belief in banking
secrecy. Their new strategy: to influence global standards on the automatic
exchange of client information.
“We’ve been fighting for banking secrecy for many years, but now we have
changed our religion,” said Michel Dérobert, director of the Association of
Swiss Private Banks.
Dérobert was one of the speakers at a two-day seminar with journalists earlier
this month. The bankers used the occasion to put on brave faces – explaining how
they think they can maintain their stature amidst a global crackdown on tax
“We want to stay an important financial centre, so we have to deal with the
question of information exchange,” explained Claude-Alain Margelisch, chief
executive of the Swiss Bankers Association (SBA). “We live in a time where the
financial industry is criticised and questioned. The financial crisis has forced
the authorities to more effectively collect their taxes. We can’t simply ignore
The global financial crisis, market manipulations and prosecutions for tax
evasion by the authorities in the United States, Germany and France have dented
the reputation of the Swiss financial services industry – the world’s biggest
centre for offshore wealth.
This culminated last year with the signing of a deal by Switzerland and the
US for Swiss banks to cooperate with the US tax authorities, and last month
Swiss approval of an Organisation for Economic Co-operation and Development
(OECD) programme for the automatic exchange of tax information.
Switzerland has come a long way. Private banker Hans Bär was still seen as
fouling his own nest in 2004 when he said that banking secrecy makes you fat and
impotent and that it’s unethical to make a distinction between tax avoidance and
And even up to March 2008, the then finance minister Hans-Rudolf Merz told
parliament that the attackers of the country’s banking secrecy legislation would
have a tough time of it.
Six years later, there is not much left of the country’s original obstinacy.
Today, the banks’ attitude is all about playing ball and getting equal
The OECD will fix an information standard and Swiss banks have to apply the
rules, which will be the same for everybody else, Margelisch said. And this
time, the Swiss experts want to actively participate in discussions and
influence the standards’ definition, terms and application, said Stefan
Flückiger, who headed the Swiss delegation to the OECD.
Later this year, the OECD is expected to release more detail on how the
standards should be applied. Swiss bankers and diplomats are confident that
their main concerns will this time be taken into account. According to Flückiger,
a third of the technical input on the information exchange standard came from
Reciprocity, data protection, the principle that data may only be used for tax
purposes, a level playing field and the regulation of loop holes such as trusts
and off-shore vehicles are the main points Switzerland would like to see the
The end of secrecy?
So do all these concessions signify the end of banking secrecy? Perhaps for
cross-border banking and tax matters it does. Domestically, however, the mills
still grind slowly – and a change is unlikely. Eventually Swiss citizens will
have to decide the fate of banking secrecy in tax matters in a popular vote.
“It is a political decision whether we still have banking secrecy regarding tax
in 10 years’ time,” Margelisch said. “Personally I don’t want the state to
control what I do financially.”
The crucial decisions on the automatic exchange over the next two years will
have repercussions on the industry for many years to come. The banking industry
is well aware of that, and it has changed its tune on the concessions the
“I don’t see it as a submission to foreign judges,” said Flückiger. “You have to
act in the interest of your country. You ask yourself what price you pay for the
special case, what damage you may sustain if you risk a black listing.”
An experts group
urged the government in May to push bilateral talks
with the European Union, as well as individual
countries within and outside the EU, to make sure
that Swiss banks will keep access to important
financial markets abroad.
Switzerland should also analyse the pros and cons of
a financial services agreement with the EU, the
group said. One option may be to discuss market
access within the framework of a transition to the
automatic exchange of information in tax matters,
according to the State Secretariat for International
The announcement followed a warning from State
Secretary Jacques de Watteville who had already said
in February that it will become difficult for Swiss
banks to offer services in EU countries after a
reintroduction of immigration quotas had blocked
bilateral relations between Switzerland and
The OECD proposal is not ideal but it’s the “least bad solution”, Flückiger
And the banks themselves? They just want the uncertainty to end. Exchanging
client data once a year is much preferable to the sword of Damocles dangling
over your head.
“It’s much easier for us to hand over the data than being held accountable years
later, having to work out what transaction took place on a particular day in the
past,” said Martin Scholl, CEO of Zürcher Kantonalbank. “All we need to do is to
programme our computers to provide that information.”