The Swiss banking system is world-famous for its secrecy and appeal to the world’s wealthiest people. If you’re even a little bit curious about the ways of the Swiss banks, the idea of private banking, and the strict secrecy laws that protect the clients of Swiss banks, you’re definitely in the right place!
I’ll do my best to explain the ins and outs of the Swiss banking system to you in a way that won’t give you a headache. This guide covers some basics about Swiss banking, the country’s largest banks, an overview of Swiss banking secrecy laws, and more!
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Switzerland Banking System: Overview
Everyone in the world knows about Swiss cheese, watches, trains, and banks. The country’s elaborate banking system has been infamous for decades now, mostly because of the strict secrecy laws that have turned Switzerland into a sort of tax haven.
It’s estimated that about a quarter of the world’s wealth is contained in the banks of Switzerland, which should tell you enough about their popularity among the vastly wealthy. The main reasons for that are the secrecy laws that protect the banks and their customers, which have been around since before WWII.
They were initially implemented to help grow the country’s economy which is precisely what happened since the banking sector nowadays accounts for approximately 10% of the country’s GDP.
Following the codification of the banking secrecy laws, the Swiss Federal Banking Commission (SFBC) was also established as the main supervising body that would be responsible for regulating finances and overseeing the Swiss banks. However, for many decades following the creation of the government body, the SFBC staff was way too small to keep up with the number of banks in the country.
In the 80s, the SFBC employed only 35 people, which was a problem. In 2007, following the passing of newer laws that would regulate banking, FINMA was founded and replaced the FBC as the main supervisory body for the financial sector.
On the other hand, the Swiss Bankers Association, which is an institution that represents Swiss banks in dealings with local and foreign authorities is a massive organization numbering more than 300 institutions and 12,000 individual members. And yet, more than 80% of the smaller banks in Switzerland have stated that they do not feel adequately represented by this institution.
Major Banks in Switzerland
Until recently there were two major banks in Switzerland – UBS and Credit Suisse AG. However, following the recent events in the spring of 2023, there appears to be only one major bank in Switzerland now. It’s UBS, which has stated its intent to purchase Credit Suisse for a whopping $3 billion, in order to prevent a massive global crisis
The Swiss National Bank is the central bank of Switzerland and the body that issues Swiss Franc banknotes and decides the country’s monetary policies. As for the other major banks in Switzerland, we can separate them into banks that are important domestically and those that manage significant assets with both domestic and international presence.
Zurich Cantonal Bank, Raiffaisen, PostFinance, and Banque cantonale vaudoise are the four most domestically important banks in Switzerland. Julius Baer Group, Lombard Odier, Vontobel, EFG International, and Pictet Group are some of the most important banks with a significant domestic and international presence.
It’s important to note that there are many other big and top-tier banks in the country. Switzerland has a total of 243 banks as of 2023. Some of those banks operate internationally, others are cantonal banks, and many are privately owned banks that have been in the same family for generations.
Banking Services Offered in Switzerland
Generally speaking, Swiss banks offer any type of banking service you might be in need of, from cash withdrawal to investment and wealth management. However, the nature of the banking services offered often depends on the type of bank. For example, the banks that are owned by cantons in Switzerland usually allow only the residents of those cantons to open bank accounts.
On the other hand, there are many private banks that are happy to work with foreign residents, and there are even banks that are entirely dedicated to foreigners.
Standard banking services offered in Switzerland include savings, investments, transferring money between accounts, transferring money to accounts abroad, deposits, online banking, and pretty much anything else you might need. It’s just that not every single bank will deal with the day-to-day stuff.
Bank Secrecy & Transparency Laws in Switzerland
Perhaps the main reason why Swiss banks are so famous and popular with the extremely rich is because of their strict secrecy laws. Although the practice of banker-client confidentiality had existed in Switzerland since the 17th century, it wasn’t codified by the federal government until the Swiss Banking Act of 1934.
This Swiss law makes it illegal for banks in Switzerland to disclose information on their clients to third parties without the consent of their client, regardless of who is asking for that information. The secrecy of Swiss banks is precisely what made the banks so attractive to wealthy foreign nationals. They could easily hide their money in offshore accounts in Swiss banks, and when the tax offices from their home countries came looking for the money, the Swiss laws would protect them.
The secrecy of the Swiss banking sector is what helped it grow into the beast that it is today. It started with Italian merchants in the 17th century, and come to World War I, when governments all over Europe started raising taxes in order to fund their war efforts, there was a massive influx of foreign money into Swiss banks.
It got even worse in World War II, and it’s no secret that the banking laws of Switzerland directly helped the Nazis. In fact, Switzerland was the perfect destination for Nazis who were fleeing persecution following World War II, because the banks could easily help them hide their accumulated wealth.
There’s another important thing to note, which just cements how serious the Swiss are about banking secrecy. It is a federal crime to leak financial data even if it’s in the interest of the public, and the Swiss media are not able to report wrongdoings in the banking sector because of the tight banking secrecy laws. The Tax Justice Network has openly criticized the Swiss banks for their secrecy laws and lauded them for signing agreements about sharing information with other countries over the past five years.
Opening A Swiss Bank Account (Individuals & Businesses)
Anyone can open a bank account in a Swiss bank, provided that they can deposit the minimum amount of money. That’s virtually the only requirement for foreigners, and with many banks, you must deposit 500,000-1,000,000 CHF (or equivalent in foreign currency) in order to be able to open an account in Swiss banks.
Some private banks have recently reduced the minimum to 275,000 CHF for foreign nationals wishing to open a bank account in a Swiss bank. The minimum deposit to open a personal account is 10,000 CHF in most Swiss banks, and you have up to a month to deposit the money after you’ve opened the account. Also, it’s worth noting that foreigners can’t open a bank account in every single Swiss bank, since some work only with Swiss residents.
That being said, if you’re looking for the best Swiss bank account for foreigners, you need to consider a few things. If you are a foreigner with a residence permit in Switzerland, Post Finance is a great option because they’re obligated to open a bank account for any Swiss resident. On the other hand, if you’re from the United States, UBS is one of the best banks for you because they have a branch exclusively for US customers.
Additionally, consider the type of account you want to open and the amount of money you’re dealing with. People with a low-mid income should consider smaller banks, while those with millions looking to grow their wealth and invest money should turn to Switzerland’s large investment banks.
Banking in Switzerland: Risks & Considerations
Banking in Switzerland is famously low-risk, which is one of the many reasons why the country’s banks are so popular among the world’s richest people. The banks in Switzerland generally retain a larger amount of capital than is usual for foreign banks, which means that they guarantee the protection of their client’s assets even during financial crises.
In terms of considerations for “regular people” who aren’t looking to deposit a cool million into their Swiss bank accounts, you should know that Swiss banks often charge pretty high fees. There are fees for opening an account, due diligence, account management, and any investments, so just keep that in mind.
Also, consider the branches of Swiss banks abroad if you’re often traveling, for the many benefits that you might reap from entrusting your money to a bank with offices in countries worldwide.
Frequently Asked Questions
What makes a Swiss bank account stand out from the rest?
The very low financial risks and extremely high privacy are essentially what make a Swiss bank account stand out from others. Your money will be safe and the bank will keep your information private if third parties come asking about your accounts.
What attracts millionaires to choose Swiss banks for their financial needs?
The Swiss banking law secrecy attracts millionaires and billionaires to use Swiss banks for their financial needs. The law is such that it is illegal for banks to disclose any information on their clients’ finances to third parties without the consent of their clients, making it virtually impossible for their home countries to force them to pay the full taxes that they owe.
What is the minimum required deposit to open a Swiss bank account?
It depends on the bank, but the minimum deposit required to open a bank account in some Swiss banks is 10,000 CHF. This amount must be deposited into your account within the first month of the opening of the account. Many other banks have a higher among for a minimum deposit, from 500,000 CHF up to 2,000,000 CHF.
Are Swiss banks obligated to report to the IRS?
In general terms, banks in Switzerland have no obligation to report to the Internal Revenue Service in the United States. That being said, the US is pushing for Swiss banks to be more cooperative and turn in information about American account owners, and Switzerland has signed several bilateral agreements promising to be more cooperative. The banks have started to share information on the accounts of US nationals, but continue to prioritize internal secrecy laws when it comes to Swiss nationals.