For members


What you should know about Switzerland’s banking secrecy

The mere mention of banking secrecy in Switzerland conjures up images of anonymous accounts and illicit cash hidden in vaults. But the reality is quite different.

What you should know about Switzerland's banking secrecy
Banks are obligated to keep details about their Swiss clients confidential. Photo by Fabrice COFFRINI / AFP

Swiss bankers have a long reputation of being tight-lipped when it comes to divulging details about their clients’ accounts.

Over the years, however, this practice has become associated with illegal activities ranging from money laundering to tax evasion, which have tarnished Switzerland’s image, earning it the name of a ‘tax haven’ or ‘tax paradise’ where wealthy people stash their undeclared assets.

READ ALSO: Is Switzerland actually a tax haven?

However, under pressure from other countries, Switzerland adopted a tougher stance on foreign account holders in 2016, exchanging information with its foreign counterparts to ensure tax transparency.

This means that a foreign individual, whether residing in Switzerland or abroad, can no longer hide assets in a Swiss bank and hope their own country wouldn’t find out about it.

So, as far as foreigners are concerned, the days of bank secrecy are long gone.

But this practice is still intact for Swiss clients.

‘Client confidentiality’

Rather than calling this practice ‘banking secrecy’, the Swiss refer to it as ‘client confidentiality,” which has long-standing legal basis.

According to the government, this legislation “protects the financial privacy of citizens from unauthorised access by third parties or by the State.”

This is how the government explains it: “Banking secrecy arises from civil law, especially the contractual obligation of the banker to keep the personal information of his or her client confidential. The privacy of the client is also protected by the general provisions of the Swiss Civil Code concerning protection of personality and by the law on data protection. Moreover, under civil law, banking legislation considers the confidentiality of the banker to be a professional obligation, the violation of which is punishable.”

In other words, the bank not only must keep information about its Swiss accounts confidential, but could actually be punished if it divulges it.

OPINION: Switzerland’s respect for privacy has benefits but it also harms the country

Challenges to the law

Some Swiss politicians are speaking out against this long-standing practice.

“Now is the time to abolish banking secrecy in Switzerland,” according to Tobias Vögeli, president of the Young Green Liberals.

He argues that changing the law requiring banks to maintain confidentiality about their clients’ financial affairs would be “an effective instrument against tax evasion.”

His party will file a motion in the parliament to this effect in the near future.

However, this drastic change is not likely to happen — not only have some MPs already voiced their opposition to it — but the law provides for exemptions to bank secrecy.

“Numerous provisions of civil law, debt collection and bankruptcy law, criminal law, administrative criminal law, and mutual assistance in criminal matters provide for exceptions to banking secrecy,” the government says.

Accordingly, it can be lifted against the client’s will if ordered by court: “The Swiss financial center has comprehensive mechanisms at its disposal to defend against assets originating from criminal offenses. By international standards, the Swiss rules are very strict.»

In conclusion, if you are a Swiss citizen, your right to ‘financial privacy’ is guaranteed.

If, on the other hand you are a foreign national, your assets will be declared to your country of origin. 

READ ALSO: What can a Swiss bank demand of a foreign client?

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For members


Swiss interest rates remain the same, but who are the winners and losers?

After five consecutive increases since it had lifted rates out of negative territory in June 2022, Swiss National Bank (SNB) will keep the current rate of 1.75 percent for the time being. What effect will this have on the public?

Swiss interest rates remain the same, but who are the winners and losers?

“We have decided to leave the SNB policy rate unchanged,” the bank said in a press release on Thursday.

It added, however, that further rate hikes can’t be ruled out in the future.

“A further tightening of monetary policy may become necessary to ensure price stability over the medium term,” the central bank said.

The fact that SNB’s rates remain the same is good news for some, and not so good for others.

Who benefits from this situation?

The clear ‘winners’ are homeowners whose mortgages are not ‘fixed.’

Most specifically, it concerns those who have taken out the so-called ‘SARON’ mortgage

With SARON, which is an acronym for Swiss Average Rate Overnight, the rate can change daily, so it becomes more expensive when rates go up, but not when they go down or remain the same — the latter being the case now.

READ ALSO: What is Switzerland’s ‘SARON’ mortgage? 

While people who have taken out SARON mortgages are not gaining anything when interest rates remain stable, they are not losing either, because not having to pay higher interest is a victory in itself.

The same is true for other homeowners who don’t have a fixed-rate mortgage: they got a reprieve from having to pay higher interest.

However, this ‘lull’ may very well be temporary: as the SNB pointed out, further rate hikes can’t be ruled out in the future.

What about rent prices?

The news is not as good for tenants.

Even though the current 1.75-percent rate has not budged upward, their rent will increase nevertheless.

On June 1st, 2023, the benchmark interest rate went up for the first time in 15 years, which means that many households will see their rents increase by an average of 3 percent from October 1st.

READ ALSO: Why rents in some parts of Switzerland are now set to increase sharply

Even if the reference rate is maintained at the same level, mortgage rates are currently significantly higher than two years ago.

Experts therefore expect a further increase in the benchmark interest rate on December 1st. “This upward trend is likely to continue for a long time,” according to Fredy Hasenmaile, chief economist at Raiffeisen bank.

What impact will the pause in interest rates have on household budgets?

Basically, the situation will remain as is now, with the exception of higher rents for some tenans, as mentioned above.

However, for people who tend to see the glass half-full instead of half-empty (in other words, optimists), the news is rather good.

The Swiss Trade Union said the decision not to increase interest rates is “judicious,” because it maintains the status quo rather than deteriorate the current situation.