One of the most stable economies in the world is the Swiss economy. Perhaps that is why Swiss banks are considered the most reliable and attractive among investors. A huge number of people daily make financial transactions in Swiss banks. In this article, we will explain why Swiss banks are so famous?
Why Swiss banks are famous?
Today, Switzerland is one of the richest countries in the world and one of the most important financial centers.
For several centuries, Switzerland remained neutral in relation to many events taking place in the world, which allowed it to develop its economy to a high level.
The first Swiss banks then appeared in the middle of the 19th century. These were either state cantonal (i.e. tied to a particular canton – the region of Switzerland), or private financial and credit institutions.
Today, UBS (“Union Bank of Switzerland”) and Credit Suisse Group (the assets of this bank – more than 1.1 trillion dollars) stand out among Swiss bank holdings.
Why is this banking system so famous?
The Banking Law of 1934 made it a punishable offense for a Swiss bank to reveal the identity of any of its customers. The secrecy of Swiss banks shields the privacy of bank customers; the obtainable protections under Swiss law are almost like confidentiality protections that exist between physicians and patients or legal practitioners and their clients.
Although banks in Switzerland also operate as conventional banks; it is the associated confidentiality that has made them famous. Astringent code of secrecy isn’t something new for Swiss banks. These banks are holding on to their secrets for over 300 years.
In 1713, the Geneva great council made regulations that mandated bankers to keep registers of their customers but banned them from sharing the knowledge with anyone except the customer unless the Council agreed with the necessity to share such information.
In a nutshell, in Switzerland, it’s a crime on the part of a banker to reveal customer information.
This secrecy code made Switzerland a secure haven for unaccounted funds. From the beginning, there were no questions asked on the source of cash or other sorts of wealth (jewellery, paintings, etc.) that entered Switzerland.
But with terrorism, corruption, and evasion on the increase, Swiss authorities (with some serious nudging from various countries) have now started rejecting those accounts which they think have illegal roots.
Swiss Bank Secrecy Laws
One of the reasons Swiss banks are so trusted is that they have been perfecting their banking laws for years. The International Law Office clarifies that any changes to the Swiss legal framework must be approved, at least by parliament, and sometimes by the public.
In 1984, the Swiss population voted and rejected a measure aimed at suppressing bank secrecy. In 1998, parliament voted to reject the lifting of bank secrecy.
The secrecy of the account of the customer is an important element of the banking laws of any country. Switzerland is understood for its strictest banking laws when it involves secrecy. Under banking laws in Switzerland, under no circumstances are banks permitted to disclose information on a customer’s account.
But banking laws, generally, are lenient to the extent that in certain special cases like within the general interest of the general public or to unearth a fraud, etc, banks can disclose details of an individual’s account once they are called upon to try to do so by a competent authority. This makes an individual having an account in any Swiss bank immune from all kinds of scrutiny.
And what are the reasons why people prefer to make low-interest deposits in Swiss banks?
It must be admitted in advance that the Swiss bank is not a source of income, but simply a source of reliability. If people want to make a profit from the interest rate on deposits, it is better to invest the money in one of the local banks.
In other words, it is possible to invest in a Swiss bank only if the money is huge and there is no desire to take the risk that it may be lost.
1.Lack of taxes: The Swiss banking system is tax-exempt, which allows them to save a lot of money by not paying taxes. Thus, by investing in the offshore zone, the depositor does not take the risk that his money can be directed to the provision of taxes, and if necessary, he can not get his money back.
2.Banking secrecy: Swiss banks confidently kept all the secrets about their customers. The concept of banking secrecy first appeared in Switzerland in 1934, but the basis of this concept still takes us back to the 18th century.
The law came into being by accident when Hitler threatened bankers, and they announced the names of wealthy Germans, as a result of which Hitler killed them. So in Switzerland, a law was passed that violates the law on banking secrecy and is punishable by life imprisonment. This law can be violated only when a criminal case is filed against the depositor.
3.Digitized accounts: In Switzerland, each depositor has a name number known only to the head of the bank, and several managers who have access to those accounts. All this allows companies to make large purchases through Swiss banks, which are becoming less popular.
4.Data protection: In the world of modern technology electronic cash Today, although they are not “behind seven seals” in ancient buildings of Swiss banks, they are nevertheless protected no worse than their paper relatives by megabit information encoding technologies.
5. Should something happen to your money, you’re fully compensated-no questions asked:
In the unfortunate event of a natural calamity or fire, there is a full guarantee that your money will be safe and returned in full. No questions asked. Such is that the security of the bank and such is that the agreement with Swiss Banker’s Association you create once you open an account.
6. You’re protected by the safest currency within the world: the Swiss Franc
The Swiss Franc is one of the safest currencies available. There is virtually zero inflation with this currency, and therefore the currency is protected by a minimum of 40% in gold reserves in the least time.
7.Backed up by a rock-solid economy
Moreover, Switzerland features a pretty rock-solid economy that isn’t suffering from any problems that are common to other countries. This is one place you’ll literally bet your money on!
8. Anyone can open an account—not just the wealthiest
It’s a misconception that Swiss accounts are just for the super-wealthy–False! The basic requirements for opening an account are that you have to be 18+ and that you should have a valid passport.
Some banks may have additional requirements like proof of earnings, and a minimum deposit, but they’re not just for the ultra-wealthy.
Why do people keep their money in Swiss banks?
Swiss bankers have had a code of secrecy regarding banking and account holders for almost 300 years.
Bankers in Switzerland are forbidden by law to disclosing the existence of your account or any other information about it without your consent (except for certain circumstances). Criminal activities such as drug trafficking, insider trading, and organized crime are the sole exceptions to the Swiss banking privacy rule. That’s why people keep money in Swiss banks.
The pros of using Swiss banks
- Switzerland’s political system. Switzerland is one of the few countries within the world during which most laws and political decisions are directly voted on by voters. This has created a really stable political environment which is arguably the first advantage of holding wealth in Swiss bank account.
- Stringent regulatory and reporting requirements must be met by the banks
- The Swiss economy is diversified between geographically and politically diverse trading partners. This spreads economic risk and makes Swiss franc an efficient currency basket.
- Unlike some countries, Switzerland features a fairly solid depositor protection scheme.
- In Switzerland, there are laws (liberal ones) governing financial transactions.
- The Swiss economy is broadly diversified, and therefore the Swiss land market is comparatively stable. Switzerland’s friendly tax laws and political environment have resulted greatly to its hosting of a comparatively high number of multinational and global companies. This means there are numerous opportunities for large-scale investment as compared to other countries.
- For (most) residents of Switzerland, there’s the additional advantage of bank customer privacy. This means nobody can make inquiries or require you to reveal information about your swiss bank accounts without providing strong proof that you simply have broken Swiss laws. This previously applied to all or any non-resident bank customers also, but now applies only to bank customers who fall into Swiss jurisdiction.
The Cons of using Swiss banks
The banks their fees of Swiss banks could be slightly higher than some other commercial banks due to the safety protocols that the bank must maintain.
In as much as their customers have access to their funds through online banking, mobile app, some people not being able to have the convenience of a local bank branch close to them might be considered a huge disadvantage.