Swiss Banking Secrecy; The Erosion of an Institution. IES WORKING PAPER 2/2008

Switzerland has for a long time been an important centre of banking services in Europe and beyond. Consequently, the banking sector has become important to Switzerland’s prosperity. This paper focuses on a central reason behind the success of the Swiss banking sector: the institution of banking secrecy, deeply enshrined in the Swiss history and tradition. The rapid development of international markets that eventually gave rise to a “group structuration process” has, however, progressively eroded Swiss banking secrecy. It has had to bend before the duty of transparency within the groups in order not to promote financial criminality through accelerated asset inflows. Switzerland has also had to develop a comprehensive legislative frame to tackle financial criminality, and to enter into international agreements providing for mutual assistance. This process has undoubtedly and irremediably weakened the Swiss banking secrecy. Most importantly, nevertheless, the questionable ethical and socio-economic grounds of this controversial institution could and should also start to erode it from within.