Essay - History of Swiss Banking in Addition to the Secrecy of...

History of Swiss Banking

In addition to the secrecy ***** Swiss banks, *****y differ from United States (US) ***** in two other significant ways, the variety of services offered and the quality of their loans. In the *****, banks are historically divided *****to investment and commercial banks, and offer *****ent *****. Investment banks create financial instruments, sell securities ***** create markets for these securities. Commercial banks take deposits and lend money. The Glass-Steagall Act of 1933 regulated these activities, although the legal barriers separating ***** banks have been decaying since the 1980's.

In the last months of 1999, that barrier broke down officially when President Clinton signed into law re*****m of ***** Glass-Steagall Act, which kept bankers and brokers separated. Swiss banks have always ***** authorized to engage in all banking activities, whether they ***** what we consider commercial activities or ***** *****.

Another major difference is safety. During 1985 alone, over 120 US banks failed. Contrast this with Swiss banks, of which only a handful have ***** in the last 50 years. Although *****re is no government-sponsored insurance agency to guarantee ***** such as the Federal Deposit Insurance Corporation (FDIC) in ***** *****, ***** banks are considered to be at least as safe as US *****. Part of ***** is because of several unique account*****g techniques. Swiss banks are required by law to *****ocate a cert*****in percentage of ***** earnings ***** a statutory reserve fund. Many banks also take advantage of the Swiss accounting procedures to overstate liabilities and understate assets and thus cerate a hidden reserve *****. This technique is widely use ***** Sw*****s banks and contributes to their stability. They have among the highest equity ***** asset ratios ***** any banks in the world. In *****, Swiss ***** ***** kept international loans to ***** Third World at low levels ***** therefore have limited exposure. ***** policy has contributed gre*****ly ***** their *****.

***** other major difference between US banks and ***** banks that is most well-known, of course, is the secret nature ***** the banking relationship. Cloaking of bank accounts began in Switzerland in 1922 during a t*****x d*****pute with the government. ***** a move to prevent large outflows of deposits to England and o*****r countries, Swiss *****ers offered deposit*****s confidential numbered accounts and the promise of concealment. In 1932 ***** ***** codified banking secrecy ***** laws making it a crime punishable by fines and incarceration for bank officers to disclose secrets entrusted to them ***** a client. These ***** were further strengthened by legisl*****tion in 1934. It also makes ***** a ***** to induce someone to violate the secrecy laws or ***** fail to report a violation of the *****. The limitation on this ban is lifted in cases where it conflicts with other Sw*****s laws ***** also does not apply ***** a court order is issued to provide in*****mation about violations ***** Swiss laws. In order for this ban to be lifted however, the violation ***** to be a crime punishable under Swiss law. Although