Swiss private banking at a cross roads

The core of Swiss banking, namely client confidentiality and privacy is being challenged. In the rich world, the mood against all big banks has turned nasty. The US has already taken a belligerent stand. At the G20 meeting in April, European leaders may discuss potential sanctions against tax havens that refuse to hand over information held by their banks.

As the Economist recently mentioned , at risk is up to $2 trillion in offshore assets held in Swiss private banks. There are also important questions at stake about the reach of the state and a citizen’s right to privacy.

Those who press for an end to banking secrecy argue that people who hide their assets want to evade taxes probably as much as $255 billion a year around the world. However, private banking is not just about tax planning. Clients have other fears too - divorce settlements, expropriation by fickle governments and thieving criminals. Also much of the new money that flowed into Switzerland in recent years may have come from countries with low or no personal income taxes, such as the Gulf. Moeover, a rapidly increasing share of money coming from European countries with high rates of tax is declared to the authorities.

Whatever be the case, the Swiss private banking industry is fighting a grim battle for survival.