page_title: Banking in Switzerland
section_title: History
hierarchical_section_title: Banking in Switzerland / Banking secrecy / History
caption_attribution_description: Kapuzinerkloster Allerheiligen in Altdorf
context_page_description: Banking in Switzerland dates to the early eighteenth century through Switzerland's merchant trade and has, over the centuries, grown into a complex, regulated, and international industry. Banking is seen as emblematic of Switzerland, along with the Swiss Alps, Swiss chocolate, watchmaking and mountaineering. Switzerland has a long, kindred history of banking secrecy and client confidentiality reaching back to the early 1700s. Starting as a way to protect wealthy European banking interests, Swiss banking secrecy was codified in 1934 with the passage of the landmark federal law, the Federal Act on Banks and Savings Banks. These laws, which were used to protect assets of persons being persecuted by Nazi authorities, have also been used by people and institutions seeking to illegally evade taxes, hide assets, or generally commit financial crime.
  Controversial protection of foreign accounts and assets during World War II sparked a series of proposed financial regulations seeking to temper bank secrecy to little success. Switzerland has been one of the largest offshore financial centers and tax havens in the world since the mid-20th century.
context_section_description: Bank secrecy in the Swiss region can be traced to the Great Council of Geneva which outlawed the disclosure of information about the European upper class in 1713. As a way of avoiding the Protestant banking system, Catholic French Kings deposited their holdings in Geneva accounts. During the 1780s, Swiss bank accounts began insuring deposits which contributed to their reputation for financial security. In 1815, the Congress of Vienna formally established Switzerland's international neutrality which led to a large capital influx. The wealthy, landlocked Switzerland saw banking secrecy as a way to build an empire similar to that of France, Spain, and the United Kingdom. Swiss historian Sébastian Guex notes in The Origins of Secret Swiss Bank Accounts:
  This is what the Swiss bourgeoisie are thinking: 'That's our future. We will play on the contradictions between the European powers and, protected by the shield of our neutrality, our arm will be industry and finance.'
  After a small scale civil war in the 1840s between the Swiss cantons, the Swiss Federation was founded in 1848. The formation of the state, through a direct democracy, contributed to the political stability needed for banking secrecy. The mountainous terrain of Switzerland provided a natural environment to excavate underground vaults for storage of gold and diamonds. During the 1910s, Swiss bankers traveled to France to advertise its banking secrecy during World War I. The war's contribution to political and economic instability, sparked a rapid capital movement into Switzerland. As European countries began to increase taxes to finance the war, wealthy clients moved their holdings into Swiss accounts to avoid taxation. The French banked in Geneva, the Italians in Lugano, and the Germans in Zurich. While disclosing client information was a civil offence in Switzerland for centuries, the Swiss Federal Assembly made it a federal criminal offence in 1934 with the passage of the landmark legislation, the Federal Act on Banks and Savings Banks. Colloquially known as the Banking Law of 1934 or the Swiss Banking Law of 1934, it codified banking secrecy. The Federal Assembly enacted the law to quell controversy over the alleged tax evasion of wealthy French businessmen, military generals, and Catholic bishops. An additional provision, Article 47(b), was drafted before its ratification to protect Jewish assets from the Nazi party.
  
  Along with protecting German Jewish assets, Swiss banks collaborated with Nazi Germany and their allies by storing their gold and cash balances in underground vaults. Adolf Hitler maintained an account at the Union Bank of Switzerland (UBS) estimated at 1.1 billion Reichsmarks. After the United States formally asked the bank to transfer the money in the 1990s, UBS wired US$400 to 700 million worth of Reichsmarks to U.S. authorities. Banking regulations in Switzerland limit the amount of orphaned assets allowed to leave a bank's custody. UBS, with consent from the Swiss government, froze the account containing Hitler's assets indefinitely, and clipped the Reichsmarks, stripping the currency of value. During World War II, UBS also maintained accounts for hundreds of German Jewish businesspeople and households. After the Banking Law of 1934 was passed, the bank aggressively protected assets of the "enemies of Nazi Germany". When Hitler announced an (aborted) invasion of Switzerland in 1940, UBS contracted the Swiss Armed Forces to blockade their retail banks and transport Jewish assets to underground military bunkers. The Swiss Bank Corporation (SBC) and Credit Suisse, did likewise but along with UBS, they were later fined hundreds of millions of dollars in reparations for their dealings with Nazi Germany. Throughout the 1980s and 1990s, numerous international proposals for bank secrecy rollbacks were made by foreign states with little success.
  After the 2008 financial crisis, Switzerland signed the European Union Savings Directive (EUSD) which obliges Swiss banks to report to 43 European countries non-identifying annual tax statistics. On Decemb
caption: International pressure to roll back banking secrecy is seen as an attack on Swiss culture and values. The Swiss parliament expressed an interest in adopting banking secrecy into their constitution in 2017.
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