Swiss Banking

Swiss Banking and Switzerland are well known internationally for its Swiss Bank Secrecy. What is probably not as well known is the fact that, historically, Swiss banks have been among the strongest, if not the strongest banks in the world, in terms of tier 1 capital and reserves.

At a point in time in the recent past, both individually and collectively, they had massive secret or hidden reserves which were not fairly obvious from a review of the respective bank’s annual report. And they were justly criticised for this lack of transparency and apparent non-compliance with generally accepted standards of disclosure. This problem was eventually dealt with in a proper manner.

Swiss banks had, and Switzerland itself has, a reputation for conservative, prudent financial management and Swiss banks have long ago earned a reputation around the world for providing sophisticated and discreet banking services. They were amongst the most profitable, if not the most profitable banks in the world.

Because of the importance of the banking industry to the overall Swiss economy, any sort of financial crisis in the banking sector would receive the full attention of both the entire Swiss banking industry and of the Swiss government. But there is no government insurance of bank deposits. Recently, like so many other renowned international financial institutions, the major swiss banks have fallen on hard times as a result of the global sub-prime mortgage loan losses and have required financial support from the government.

There are more than 400 banks in Switzerland, ranging from the “Two Big Banks”, i.e. Credit Suisse and UBS, down to small banks serving the needs of a single small community or a few special clients. The Two Big Banks have extensive branch networks both throughout Switzerland and in many international financial centers. A number also have offices or other representation in foreign countries. Among the licensed Swiss banks are the Swiss branches of banks which have their headquarters elsewhere.

Banks are licensed by the Swiss Federal Government through its Banking Commission, and may operate throughout the country. The Swiss banking industry and financial markets are well controlled and monitored by the Swiss National Bank and other Swiss authorities, making Switzerland one of the safest countries in the world to conduct banking activities and do business.

Some banks specialize in only a few banking services, whereas others provide a wide range of services. As in most of continental Europe, individuals usually buy and sell stocks and bonds through their banks. The Swiss banks have a long reputation for managing investment portfolios for their clients, and providing other services such as estate planning, wealth management, trust companies, etc., for individual customers.

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