Switzerland: Offshore Business Sectors
Switzerland is the world's largest private banking centre. In 2016 it was home to 261 major banking institutions, though it is notable that this declined from 312 in 2011. Switzerland is estimated to hold up to 35% of the world's private wealth. Assets under management of Swiss banks are estimated to top CHF10 trillion.
In recent years a combination of legislative measures and market forces have reorientated the Swiss banking services market so that banks cater less and less to the traditional small-to-medium-sized private accounts and more and more to large professional clients for whom sophisticated services are being offered at competitive prices.
One of the driving forces behind these changes has been Switzerland's desire to be seen internationally to be playing a meaningful part in the war against organized crime and money laundering.
Since 2009, the Swiss banking sector has been regulated by the Swiss Financial Market Supervisory Authority (FINMA). Banking is defined to include all deposit-taking activity, but does not include the issuing of bonds or securities trading. The offices, branches, agencies and permanent representatives of foreign banks are covered by the law. See Law of Offshore for details of the licensing process, and FINMA’s supervisory regime.
The Banking Law contains stringent provisions to ensure secrecy, which are echoed in FINMA regulations; they contribute greatly to the appeal of Swiss banks have to investors and depositors. The secrecy provisions are subject to limited exceptions contained in the domestic and international legislation that Switzerland has adopted as part of its campaign against money-laundering.
The key pieces of legislation in this respect are the Money Laundering Act 1998 and the Federal Act on International Mutual Assistance in Criminal Matters 1983. The Money Laundering Act in particular has been very effective: it allows penalties of up to US$7m for non-compliance, and in the six months after it came into force assets totalling US$124m were seized. See Law of Offshore and Other International Agreements for further details of these two pieces of legislation.
In January 2009, a Swiss Bankers Association report reflected on Switzerland's success in gaining status as a leading global wealth management centre.
The report stated that the tradition of high-end services, the availability of skilled staff, and a redictable regulatory environment have all contributed to Switzerland’s leading position among global wealth management centres.
"Switzerland provides wealth management banks that are a pillar of market positioning in an increasingly brand-conscious industry. Merging tradition and entrepreneurial spirit has winning ways and, clearly, a profitable edge," the report said.
The report assessed how Switzerland compares to its global peers, in what ways Swiss wealth management banks differentiate themselves, and which strategic responses to industry threats and opportunities they have espoused.
With 9.1% of global assets under management (AUM), Switzerland is among the world’s leading trio of wealth management centres, alongside the United States and the United Kingdom.
It is the world’s leader in offshore private banking, with a market share of 27%. The country’s largest banks, UBS and Credit Suisse, rank among the world’s largest wealth management firms.
At the end of 2011, AUM in Switzerland (securities holdings in bank custody accounts) reached CHF5,300 billion.
In March 2009, as part of his marked enmity towards Swiss banking secrecy, German Finance Minister Peer Steinbrueck ordered German banks with Swiss subsidiaries to close any accounts - notably those of Liechtenstein foundations - considered to be 'lacking in transparency'.
Also in March, the Swiss Federal Council announced that Switzerland intends to adopt OECD standards on administrative assistance in tax matters in accordance with Article 26 of the OECD Model Tax Convention. The decision will permit the exchange of information with other countries in individual cases where a specific and justified request has been made. The Federal Council has decided to withdraw the corresponding reservation to the OECD Model Tax Convention and to enter into negotiations on revising double taxation agreements. Swiss banking secrecy remains intact, said the Council.