When asked to identify the factors behind Switzerland's success as an international banking and financial centre, Pierre Mirabaud, Chairman of the Swiss Bankers Association, summed it up in four words: "Security, stability, competence and discretion".
Banking is a key sector of the Swiss economy. As employers banks offer a large number of well-paid jobs; as taxpayers they make considerable contribution to public finances; and finally as centres of innovation, they provide impetus to the economy and society as a whole.
Pivotal role
According to the Swiss Bankers Association, Swiss banks generate more than nine per cent of the country's GDP, employ more than three per cent of its workforce, manage more than 4,000 billion francs (about Dh1.21 trillion) in client investment portfolios, contribute an estimated 10 to 15 billion francs (about Dh30.44 billion to Dh45.66 billion) to public finances, and manage one-third of all internationally-invested private wealth.
Switzerland has a long tradition of political, economic, social, legal and fiscal stability. More than any other sector, the banks embody the Swiss qualities of cosmopolitanism, expertise and discretion. As leaders of the wealth management industry, bank client confidentiality is of prime importance to Swiss banks. The country has highly-developed 'know your customer' rules.
Banks are required by law to verify the identity of a client and establish the identity of the beneficial owner of the assets. As a result of these and other legal obligations to prevent money laundering, Swiss banks also have to ask questions about the source of funds to be deposited with them and about a client's financial situation.
Therefore the banks have an enormous quantity of information about their clients' financial, professional and personal affairs. The detailed nature of this information justifies a corresponding high level of confidentiality. In fact, anyone violating bank-client confidentiality in Switzerland is actually committing a crime and is liable to prosecution.
However, in Switzerland the rights to privacy can be ordered suspended by a judge when proceedings are under way into serious crimes such as money laundering, financing of terrorism, corruption and fraud.
"In an age of ever-increasing state and commercial intrusion into our private lives, I consider it my duty as a banker to protect the privacy of honest bank clients while exposing any criminals to the full force of the law, and I challenge critics to name an international financial centre where banks do this better than in Switzerland," says Mirabaud.
It is a common misconception that Swiss bank accounts are only for millionaires. From tourists visiting European destinations, students studying in European universities, traders, sportspersons who participate in sports events worldwide to film stars and filmmakers, international airline pilots and seamen, authors, diplomats and attorneys, Swiss banks cater to all individuals.
However, the Swiss bank is required to know its client sufficiently well to ensure that funds being placed on deposit are not coming from illegal activities.
According to Arif Lakhani, Chief Executive Vice President of Habib Bank AG Zurich, "The ideal way to open an account would be to approach a branch of a Swiss bank and provide all the information required as per the Swiss compliance and due diligence requirements."
Broad range
Apart from bank secrecy, Switzerland provides a number of significant advantages. The banks provide the finest level of service available anywhere in the world. Swiss bank personnel are famous for their knowledge and experience.
The banks also offer a broad range of services, including securities brokerage and portfolio management. They also provide services such as estate planning and wealth management for individual customers. In addition, the Swiss franc has long been one of the world's most reliable currencies, making Switzerland a predictable place to conduct banking business.
As of 2006, there are about 408 banks in Switzerland, ranging from the 'two big banks' (Credit Suisse and UBS) down to small banks serving the needs of a single community or a few special clients. UBS and Credit Suisse are respectively the largest and second largest Swiss banks and account for more than 50 per cent of deposits in Switzerland. Each has extensive branch networks throughout the country and most international centres.
Due to their size and complexity, UBS and Credit Suisse are subject to an extra degree of supervision from the Federal Banking Commission.
Wegelin & Co, the oldest Swiss private bank, founded in St Gallen in 1741, today has the highest local presence of all Swiss private banks and is attracting new assets from around the world. Says Christophe Morize, Director of Wegelin & Co, "Wegelin has developed unique ties with leading universities. It has 15 to 25 students from these universities working for the bank, shaping a reservoir of future talents. With their support Wegelin develops and follows fact-based active investment strategies founded on sound economic theory rather than the latest 'in-trend' ones."
Diversification opportunity
Now Wegelin wants to make its investment strategies available to the Middle East. "We offer two key attributes to investors of this highly dynamic and fast growing region - high and sustainable out-performance and a diversification opportunity (investment into alternative asset classes)," says Morize.
The Swiss banking system is based on the concept of universal banking. Hence a single bank can offer a diversified range of banking services such as asset management and investment advice, payment transactions, deposits in the form of savings accounts, stock exchange transactions, issuing of bonds etc.
These universal features are disabled in the banking sectors of various countries, where commercial and investment banking tend to be separate forms.
Banks in the country also offer foreign customers savings accounts and numbered or coded Swiss accounts. The former is a common type of bank account that comes with powerful internet banking access. It is easy to open such an account entirely online provided the customer shows proof of proper identification from his country of residence.
Corporate or joint accounts are also possible, provided relevant papers are shown to the bank.
The numbered or coded Swiss account is a highly private account that conceals the client's identity. Millionaires, business magnets and eminent personalities own such accounts worldwide. Numbered accounts omit reference to the customer's name or other identifying information, replacing it with a code number chosen by the account user.
Private banks offer accounts primarily for private clients, and deposits are not generally less than $1 million (about Dh3.678 million).
Global market
Swiss banks are dominant players in the global financial market. "Middle East markets have traditionally been well serviced by Swiss banks for many years. Due to continuous wealth creation in this part of the world, Swiss banks will continue to keep this region in their top target markets," says Lakhani.
Major Swiss banks have now opened offices in the Dubai International Financial Centre to service the region. The new branch of UBS at DIFC, for instance, provides a comprehensive range of financial and investment services that extends across the Middle East and beyond. n
