The success of Switzerland as a financial centre owes much to the Swiss Bankers Association, also known as SwissBanking, founded a hundred years ago this month.This content was published on January 23, 2012 - 21:00
To mark the occasion, the association commissioned historian Robert U. Vogler - who headed the historical research section of the UBS bank from 2003 to 2009 - to produce an account of its first 100 years.
The association - founded in Basel in 1912 to represent the interests of the banking industry – is proud of its record.
“The banks are hugely important to the Swiss economy in many respects,” it says on its website. It points out that the sector generates 12 per cent of gross domestic product and provides 195,000 jobs.
A major strand running through the history of the association is the issue of bank secrecy – something which is still at the centre of debate today.
Swiss banking law
Switzerland’s first banking law came into force in 1935, and initially ran into strong opposition from the association. Triggered by the need for state intervention to rescue the People’s Bank of Switzerland after it had made risky credit deals in Germany, the law gave the state greater powers of supervision over banks’ activities.
Today that law is mainly remembered because it also laid down the legal framework for the previously unwritten practice of banking secrecy. Surprising though this may sound now, this aspect played only a marginal role in the political discussions at the time, Vogler writes.
For years the association has had to devote a lot of energy to conflicts with tax authorities in France and the United States, although this has mainly occurred behind the scenes, says Vogler.
In 1932, for example, two representatives of a Basel bank were caught red-handed helping wealthy French citizens to avoid tax. Their arrest enabled the French police to seize a lengthy list of customers, and was a great scandal at the time.
The US Treasury also demanded that the banks supply information about undeclared tax for the years 1929 to 1933 and wanted details about transactions. After the Second World War the US tried unsuccessfully to get banking secrecy lifted.
How much longer?
Vogler devotes a section to the banking initiative launched by left wingers in Switzerland in 1978 “against the misuse of banking secrecy”.
Development organisations wanted to fight against “the billions of francs worth of ‘hot money’ from developing countries suspected to be held in Swiss banks under the protection of bank secrecy,” as Vogler puts it.
“Under the professional guidance of the Bankers Association the initiative was successfully fought off,” he writes.
But the association realised as long ago as 2007- before many other financial players - that the future of business with foreign clients lay in the management only of assets on which tax has been paid.
It therefore now favours “deals with foreign states which make it possible to regularise previously undeclared assets in Swiss banks by means of a withholding tax while safeguarding the private sphere.”
Hans Ulrich Jost, a retired history professor from Lausanne University, told swissinfo.ch that ever since the 1930s banking secrecy has been an important ingredient in Switzerland’s financial success.
"The fact that Switzerland could grow as a financial centre in the way it did in the 20th century has a lot to do with the fact that it created an advantageous basis for tax fugitives to place their property,” he said.
Even the new chief executive of UBS, Sergio Ermotti, said in a recent newspaper interview that Switzerland had grown rich on illicit funds, Jost pointed out – which is why banking secrecy has been so vehemently defended.
And after “reasonable people” saw that it was no longer tenable, the finance minister of the 1990s, Kaspar Villiger – currently chairman of UBS – and his successor Hans-Rudolf Merz went on maintaining that it was not negotiable.
But Jost is critical of the fact that Vogler does not mention the power of the banking lobby and its attempts to exert political pressure.
As chairman of the Diplomatic Documents of Switzerland (DDS) research project Jost knows just how much of a political role the Bankers Association has played, however discreetly, especially since the Second World War.
"It is extraordinary the extent to which the bankers and the administration sometimes worked hand in hand, and afterwards described it as Swiss foreign policy,” he said, citing Switzerland’s credit policy towards other states as one example.
He thinks the new policy of Swiss banks to focus on assets that have been declared to the tax authorities is a clever strategy in two ways.
"On the one hand, they are embarking on a business practice that encourages clients to pay tax on their investments, and on the other they are creating products for foreign customers that will enable them to invest money in Switzerland without their names being divulged abroad."
Swiss financial sector
The BAK Basel economic research institute issued a report on the Swiss financial sector in January 2012.
In 2010 the sector employed 234,341 people, of which 142,246 worked in banks.
Zurich employs 43% of all financial sector workers.
The report predicted lower growth in Zurich in the years up to 2020 compared with the last decade.
Jobs in the banking industry are likely to suffer most, since insurance companies have already restructured.
Geneva accounts for 19% of all those employed in the financial sector.
It is a leading player in private banking and commodity trade finance.
Basel is the third most important financial centre in Switzerland, employing 15,000 people.
Another 12,000 people work in the sector in the Italian-speaking canton of Ticino.End of insertion
Swiss Bankers Association
The Swiss Bankers Association, founded as a trade association in 1912, has also been known as SwissBanking since 2001.
Its founding meeting was attended by 316 representatives from 159 banking houses.
It now has about 347 institutional members and about 17,600 individual members.
It has offices in Basel, Zurich and Bern, employing about 70 staff.
It has 11 commissions and associated working groups which deal with key issues affecting the industry.
It describes its main purpose as to “maintain and promote the best possible framework conditions for the Swiss financial centre both at home and abroad”.
The SBA is not the only body representing banks; there are also specialist associations for cantonal banks, regional banks, foreign banks and private banks.End of insertion
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