Monday, June 10, 2013

A Roadmap for Swiss Banks to Move Forward? (6/10/13)

Readers might be interested in this Financial Times editorial written by a former chairman of the governing board of Swiss National Bank.  Philipp Hildebrand, The sheriff has spoken – and the Swiss must submit (Financial Times 6/9/10), here.  Mr. Hildebrand concludes:
First, Swiss banks must quickly settle with the US. Ideally, the government will find a way to avoid drawing in parliament again, after it refused last week to vote on the government’s bill; and the banks can proceed in line with the framework set by the UBS settlement. After all, equal treatment in equal circumstances is a fundamental Swiss constitutional principle. 
Second, the government and the banks must quickly recognise that client anonymity for tax purposes is a thing of the past. The specific contours of how information will be exchanged across sovereign borders will have to be worked out. Ideally, this will occur under the auspices of the OECD, a Paris-based think-tank, where Switzerland should demand a robust voice at the table. 
Third, and crucially, Bern must settle the problem of undeclared legacy assets, largely of European origin, residing in its private banks. A significant share was deposited a long time ago in a different era with different norms. A pragmatic and morally defensible solution is for clients to pay a one-off tax on them to their respective countries of residence. In return, they would be allowed to preserve their anonymity. The level of tax could be broadly linked to the relevant rates in the European countries in question. 
Finally, Bern must be steadfast in demanding access to the EU market for its banking services, enabling it to refocus the sector on its excellence in cross-border wealth management. This is equally in the interest of the EU: any other outcome will drive significant assets out of Switzerland and probably out of Europe.


  1. Instead of making demands backed with senseless threats while offering nothing in return, America should smash its banking secrecy, fight against local money laundering and abolish its diaspora tax while strengthening privacy protection, promoting freedom of expression respecting democracy, abolish its bi-party monopoly, and, and, and....

    Josef Ackerman did an excellent job of explaining the Swiss situation in the Wall Street Journal:

    "The success of Swiss financial institutions owes a great deal to
    other factors, including our country's neutrality, the rule of law,
    peaceful labor relations, and a sound policy mix ensuring low taxes and
    price stability. It is this unique blend of factors, far more than
    alleged tax advantages, that give Swiss institutions their competitive
    edge. In my former incarnation as a banker, clients have told me many
    times how much they value the stability and safety associated with

    The environment in which financial institutions are operating keeps
    evolving, and it is time to recognize the changes. In April, the Group
    of 20 (G-20) called for better cooperation in tax matters, and it
    charged the OECD with developing a global standard to address
    international tax avoidance and evasion.

    What tends to be overlooked is that Switzerland has been working hard
    to build trust and global standards. In 1961, it became a founding
    member of the OECD and subsequently a member of the Financial Action
    Task Force (FATF). It participates in the Global Forum on Transparency
    and Exchange of Information for Tax Purposes, and is engaged in the U.N.
    dialogue on tax matters."

    At the going rate of things, America will only get its way through the threats and scares of the "domino effect". Heck American may get its way, for only for the short term. More and more people are looking to east for fair and balanced global leadership.

  2. Could you expand on this?

    "The level of tax could be broadly linked to the relevant rates in the European countries in question. "

    Switzerland is a high-cost island, so if one wants higher taxes, then one must also lower the cost of living. What efforts have America made to lower the Swiss cost of living? Maybe America should focus on reducing debt and spending, instead of trying to force other nations to be equally inefficient. Just think of all money America would save if it minded its own business!

  3. Interesting post. I make a few comments.

    1. Hildebrand's wife is American.

    2. The aforementioned action plan laid out by Hildebrand is probably not bad from the standpoint of the US. The problem is I am not sure why other European nations would go along with it. On point #2 I am not sure why the EU countries would accept less of Switzerland than what the US did. On point #3 having the EU grant market access to Swiss financial institutions I don't see why they should. Switzerland of course is NOT a member of the European Union but at any time could choose to apply to become a member. By not being a member Switzerland has instead shifted its economic relations outside of Europe towards the US and other countries. I would argue this has benefited the US by weakening European political and economic integration.

    3. On the subject of Switzerland and the EU there is also the problem of Liechtenstein. Back in the early 1990s Liechtenstein choose along with some other countries such as Sweden and Austria to enter into to an arrangement called the EEA. EEA countries have been for many years been given full markets access to the EU in many business sectors including banking. Most of the original members left to become full EU members but Liechtenstein, Norway, and Iceland remain in the half way house of the EEA. For Liechtenstein the EEA agreement has important benefits. Liechtenstein can obtain the benefits of being economically integrated with Switzerland but also get the benefit of EU market access. Liechtenstein also provides a fig leaf to Norway and Iceland to help maintain what most would call a very out of date and antiquated arrangement(Norway and Iceland have their own reasons for not becoming full EU members). However if Switzerland were to receive EU market access it might lead towards full Liechtenstein EU membership with Switzerland, Norway, and Iceland all forced in the same direction.

    4. Norway and Switzerland while very different countries have both notably keep their distance from the EU to the advantage of the US. Full EU membership of Norway and Switzerland would be a real feather in the cap of Brussels.

  4. The economy commision of the Swiss Council of States has just recommended for Switzerland to reject "Lex USA". It is obligating the Federal Council to release the details of US demands to the public.


    So far, America has opposed being transparency, ironically and hypocritically.

  5. The US sure is pushing Switzerland really hard into distancing itself from the US to the advantage of the EU. I don't see how the US can benefit from this in long-term.

  6. The vote was close, 7 to 6. The article also lists banks which were consulted about this, some have been mentioned before as those being investigated, there are two that have not been (Banque Cantonale Vaudoise and St. Galler Kantonalbank) I don't think one can draw the conclusion that the additional banks are being investigated, only that since they are some of the major cantonal banks they are more likely to have deposits, particularly from US persons resident in Switzerland. The banks mentioned in the article were Credit Suisse, Julius Bär, Pictet, Neue Bank [New Bank, never heard of it possibly they meant Neue Zuercher Bank), HSBC, Zürcher Kantonalbank, St. Galler Kantonalbank, and Waadtländer Kantonalbank (better known as Banque Cantonale Vaudoise since it's in the French speaking canton of Vaud.)

  7. Wednesday June 12: Lex USA approved by Swiss Senate 24 to 15, House to vote next week. See


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