Swiss Banking System Essays

Ethical principles are essential for the proper and fair conduct of business around the world. In principal, ethical principles can and should dominate any and all decision making, regardless if it occurs during a business transaction. Without ethics, it would be impossible to conduct business and establish the trust necessary between consumers and business entities.

Of the many ethical principles that exist, several exist that relate to business ethics. Egoism is defined as the ethical belief that self-interest is the just and proper motive for all human conduct (www.dictionary.com). Egoism is essential in the banking industry because an individual in their right mind will not use nor trust a bank if the bank is going to lose or misuse their money. Cultural Relativism is defined as the principle that an individual human's beliefs and activities should be interpreted in terms of his or her own culture (www.wikipedia.com).

Still more ethical principles that guide business making decisions include Utilitarianism, which is defined as the ethical theory proposed by Jeremy Bentham and James Mill that all action should be directed toward achieving the greatest happiness for the greatest number of people (www.dictionary.com). Rights, the foundation of the U.S. constitution and the happiness of free people around the world, are defined as anything that is in accordance with what is good, proper, or just (www.dictionary.com). Without the protection of all individual's rights, the world cannot exist in its current state, and the conduct of business would be impossible. Lastly, Justice is defined as the quality of being just; righteousness, equitableness, or moral rightness (www.dictionary.com). Without justice, it is impossible to protect individuals' rights and ensure their safety and well-being.

Throughout the "Confidential Accounts at Swiss Bank Corporation" case study, without a doubt, the key decision-maker in the report is Alan Adler, the very capable and renowned investment adviser in Zurich, Switzerland. As the adviser for many wealthy individuals from Canada, Germany and the United States, Adler prides himself on the services he and the ultra-secret Swiss banks for which he works can provide those individuals. Mr. Adler has always encouraged his clients to read the Swiss Bank Corporation (SBC) Profile, the SBC annual report regarding bank policy. Before 1993, Alan Adler was able to promise absolute financial confidentiality to his clients, keeping all of his clientele information, especially the names, addresses and account numbers, and the system to decode them, in an SBC safe deposit box, accessible only to him and the people he served. However, given increased international pressure, especially from Haiti, the Philippines and the United States, the Swiss Parliament began to reconsider its long standing and internationally renowned secret banking law.

From 1993-2000, again with increased pressure from the international community, the Swiss Parliament enacted a series of changes that effectively eliminated the secret policies that once made Switzerland the epicenter of personal, private finances. Increased transparency by Swiss banks with international investigations has netted the reclamation of several hundreds of millions of dollars by individuals around world. Due to the changes in Swiss banking law, the accounts of several deposed dictators, most notably Saddam Hussein, have been tapped, and the money laundered or stolen have been returned to its rightful owners. Moreover, the US Securities and Exchange Commission, with the help of the Swiss government, are able to pursue money launderers, inside traders and tax evaders. Essentially, the once ultra-secret Swiss bank accounts are a thing of the past. Bankers in Switzerland, under the old law, retained the "right" to report suspicious or illegal banking activity. Under the new law, bankers are obligated to report any activity that seems illegal, and are legally obliged to cooperate with any financial investigation, both domestic and foreign.

Given Alan Adler's sterling track record, the changes he observed from the early 90's into the early 2000's was disturbing to him, especially given the implicit level of trust he has with each of his clients. Before now, Adler has always, without a doubt, been able to ensure his clients that their personal financial information would always remain secret; thus, his first dilemma. In good conscious, Adler can no longer promise his clients the hallmark Swiss bank secrecy that he once could, a problematic development. Secondly, Adler faces the prospect of being forced, even unwillingly, to report ALL of his clients' information if any of them

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The significance of the Swiss Financial Centre

The Swiss financial centre, with banking as its leading segment, is of immense international significance and is positioned amongst global market leaders. The financial centre contributes greatly to gross value added in Switzerland and by doing so to the wealth of the whole Swiss population. (Swiss Bankers Association, 2010)

In many aspects the banks are highly important to the Swiss economy. In terms of employees they offer a wide range of skilled jobs with potential earnings that are above average; a great portion of public sector financing is secured do to their tax contribution; and not to forget that they are centres of innovation and drivers of value added thus generating momentum for the entire economy. (Swiss Bankers Association, 2010)

Key information on the Swiss economy along with value added and employment are given in the tables below and in the appendix.

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Characteristics of Swiss Banking System

The development of the Swiss banking system began in the middle of the 18th century. When comparing the economic importance and its share in world trade, Switzerland has a large banking and financial sector. The country is one of the leading financial centres after New York, Tokyo and London. Switzerland banking system is highly efficient and secure. Swiss banks function with the maximum equity ratios of all, which makes Swiss banking appealing to both market analysts and investors. Swiss banks are obliged by rules and regulations to support their transactions with capital ratios which are the greatest in the world. Major Swiss banks continuously achieve high marks for reliability and security from main credit rating organizations (Bode, 2006)

The success of Swiss banks has been achieved by solid accomplishments. For centuries, Switzerland has had social, political and fiscal stability. Despite continuous changes in the banking sector, Swiss bankers adhere to proven fundamental principles and strict codes of conduct set forth by organisations like the Swiss Bankers Association (SBA). (Bode, 2006)

Swiss law is responsible for assigning concern to safeguard the freedom of the individual. All Swiss and foreign citizens are considered to be equal in front of the law. Those who do business with Swiss bank thus benefit from the legitimate protection of their personal assets. Safeguarding the identity of the customer is very important and that is why the accounts in Switzerland banks are identified by numbers only. The numbered accounts are simply an enhanced means of security in preserving the clients justified entitlement to discretion. The bank confidentiality in Switzerland is a right and obligation which every bank worker is legally required to fulfil. (Bode, 2006)

Diversity of the Swiss Banking System

Besides the qualities previously listed, the Swiss banking system offers a wide variety of services. The system is set upon the model of universal banking, in which all banking services can be offered by all banks. None the less, different bank groups have developed and in turn focus in certain services. (Bode, 2006)
The Swiss banking system areas of business include the lending business, property management, savings recommendation, payment dealings, stock exchange dealings, deposit business, underwriting business, financial analysis and its core business wealth management (see table below). This is contrary of banking systems which split commercial banking from investment banking, commonly found in Anglo American countries and in Japan. The universal banking advantages include the ability to service customers from all areas of the economy and more importantly spread risk over a number of banking services. (Bode, 2006)

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Structure of the Swiss Banking Sector

The 325 banks in Switzerland are divided into various categories by the Swiss National (SNB). They are: big banks, cantonal banks, regional banks and savings banks, Raiffeisen banks, other banks (including, stock exchange banks and commercial banks, as well as foreign-controlled banks), private banks and branches of foreign banks. Each bank category varies with regards to company focus, size, geographic range of activities and legal form. A dominant place within the banking sector is held, in every respect, by the big banks. This applies to both balance sheet total and the market share. (Federal Administration Swiss Statistics, 2009) For more details on the above mentioned banks, please refer to the table below and the appendix. (Swiss National Bank, 2010)

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