Federal Act on Banks and Savings Banks


The Federal Act on Banks and Savings Banks is a Swiss federal law and act-of-parliament that operates as the supreme law governing banking in Switzerland. Although the federal law has only been amended seven times, it has been revised multiple times to limit and expand its banking secrecy provisions since its ratification. The banking secrecy provisions in the Federal Act are additionally enforced through multiple civil codes in the federal Swiss Civil Code and locally through cantonal law. In December 2017, the Swiss parliament launched a standing initiative and expressed an interest in formally embedding banking secrecy within the Swiss Federal Constitution rendering it a federally-protected constitutional right.
The law was passed by the Federal Assembly of the Swiss Confederation on February 2, 1934 through the power of the constitution's 34th and 64th articles. It was put into force on March 1, 1935. Colloquially known as the Banking Law of 1934 or the Swiss Banking Act, the federal law is most known for Article 47, the specifications regarding banking secrecy. Article 47 makes it a federal crime to disclose the information or activity of clients banking domestically to foreign entities, third parties, or even Swiss authorities without either a) consent or b) an accepted criminal complaint. Many Articles within the Federal Act concern themselves with banking supervision for the sole purpose of enforcing Article 47. The passage of the law makes Switzerland home to the most strict and expansive banking secrecy laws in the world.
Switzerland has had a long, kindred history with banking, more specifically with banking secrecy, since the early 1700s. While banking secrecy has been deeply engrained in Swiss society and civil law, the Federal Act formally designated a federal criminal offense codifying banking secrecy into law. In the decades following the implementation of the law, Swiss banks were granted the right to use numbered bank accounts and protect client information through a variety of supplementary statutes. Despite significant and controversial global events straining the country's banking secrecy, its laws have been revised minimally and to little meaningful effect. Of the total seven amendments to the Federal Act, the last was passed on March 22, 2013. The Federal Act, alongside more generally Swiss culture and the banking industry, has been accused to facilitating systematic tax evasion, money laundering, and the underground economy.

History

and bank–client confidentiality had been a traditional and a civil offense in Switzerland since the 1770s. A handful of Cantonal-based statutes had existence since the 1800s that were regularly enforced to protect client information even before the passage of the law. Under these local statutes violations of banking secrecy were dealt with civil rather than criminal proceedings. During the early 1900s, an increasingly volatile international climate led multiple European countries to reform their banking industries and taxation programs. France, in particular, hiked their inheritance tax and began to increase income taxes in preparation for World War I in 1914.
Switzerland sought to capitalize on the global taxation paradigm shift by formally codifying and redoubling their centuries long association with banking secrecy. Unable to compete with the financial centers of London, Paris, and Berlin, the Swiss government began drafting the law in the early late 1920s. According to Swiss historian Sébastian Guex, "This is what the Swiss bourgeoisie are thinking: 'That’s our future. We will play on the contradictions between the European powers and, protected by the shield of our neutrality, our arm will be industry and finance.'" After news that the law was to be brought to a vote, Swiss bankers traveled to European countries to advertise the law's protection of client information. As the first World War commenced, global financial instability, economic volatility, and monetary crises positioned Switzerland at the forefront of the financial world. The country's neutrality, monetary stability, political stability, low tax rates, and a rumored federal banking secrecy statute attracted hundreds of millions of dollars into its banking industry.
After the World War I concluded in 1918, multiple governments began requesting client information from Switzerland to little disclosure. In early 1934, there was a banking crisis in Switzerland that caused one consent or b) an accepted criminal complaint. An additional provision of the law, Article 47, was drafted before its ratification to protect Jewish assets against Nazi forces during World War II. The Swiss Federal Assembly of the Swiss Confederation passed the federal law on February 2, 1934 and put it into force on March 1, 1935. The passage of the law made Switzerland home to the most strict and expansive banking secrecy laws in the world.

Original frame

The original framing of the Federal Act contains 56 articles that establish a variety of financial, legal, and economic regulations for any banking institution operating within Switzerland. The most notable Articles within the Federal Act are listed below:
The Banking Law of 1934 has been amended with alternative statutes to expand and reduce the powers set forth in its original framing with:
In addition to the Banking Law of 1934, Switzerland maintains a variety of statues in the Swiss Civil Code on banking secrecy that work in conjunction to Article 47:
The Federal Constitution of the Swiss Confederation also guarantees certain rights related to banking secrecy:
In December 2017, multiple parties within the Swiss parliament launched an standing initiative to ban the automatic exchange of data in Switzerland by embedding banking secrecy into the constitution.

Revisions

The Banking Act of 1934, and more generally the banking industry it covers, has been revised multiple times in response to domestic demand and international pressure. Measures to expand or otherwise improve banking secrecy in Switzerland is often met with high levels of public support, usually passing through legislative bodies and commissions with ease and little debate. International pressure to roll back banking secrecy is met with social and political backlash with many politicians accusing foreign states of hypocrisy and attacking Swiss society. Of the few proposed roll backs, international agreements are significantly watered down, infrequently enforced, and occasionally overridden or caveated by Federal Supreme Court rulings.
illegally disclosed UBS client information, a federal arrest warrant was issued and a one-time DPA was granted to UBS.
frequently sides with Swiss citizens and protects the country's banking secrecy laws.
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