Popular fiction has created a belief that the anonymous numbered account is the centerpiece of the Swiss banking industry.  In truth, Swiss banking is known worldwide for its stability, security and careful management of investments and assets; privacy and confidentiality are – to a large extent – a relatively modern occurrence.

The “Secret” of Swiss Banking

The key to the success of Swiss banking is the country’s neutrality, established in the late 1800s and respected by both sides of the conflict in World War I and II.  To this day, Switzerland remains politically and economically neutral: it is not a member of the European Economic Union (EU) or the European Economic Area, and was not even a member of the United Nations until 2002.

Switzerland’s strict neutrality (bolstered by national attitudes and its military capabilities) has fostered a stable environment which allowed Switzerland’s economy to grow and prosper, and establishing the country as the safest place for deposits and investments.   The Swiss Franc, for example, has long been considered the world’s most stable currency unlike the US dollar or even the British pound, which have undergone major fluctuations in value over the years.

Currently, an estimated 2.2 trillion US dollars in offshore funds (or monies kept outside their country of origin) are handled by Swiss bankers, equivalent to a third of all offshore funds worldwide.  As of 2003, 14 percent of Switzerland’s Gross Domestic Product comes from the financial sector, employing almost 5.6 percent of the workforce (or 180,000 people).

What Makes Swiss Banking Different?

Swiss banking is based on the concept of universal banking which means that any Swiss bank can offer all banking services, such as deposits and credit, investment advice and asset management, securities and stock transactions, etc.  This allowed Swiss banks to spread their risk over a wider number of bank businesses and customers from all economic sectors, which contributed immensely to the country’s financial and banking stability.

This is a different approach from Western banking practices which separated commercial and investment banking; it is only in the past few decades that Western countries have started adopting the universal banking practice.

Another major difference is Swiss banking practices is its confidentiality, institutionalized in Article 47 of the Federal Law on Banks and Savings Banks, which took effect in 1934.  Under the law, a client’s privacy is held sacred with heavy penalties imposed on bankers or bank employees who violate a client’s confidence.  Even ordinary account holders are covered by the privacy and confidentiality statutes; ‘numbered’ bank accounts, on the other hand, allow for a much higher degree of security than other accounts.