Yesterday was the international day of banks. The day is annually commemorated worldwide to acknowledge the role of banks in providing people with important information for their financial security. In line with the idea of the day, we wanted to talk about what Swiss private banks offer Americans in terms of safety and privacy for their personal wealth information. Unfortunately, the "faux pas" for many Americans when it comes to Swiss investment banking is thinking that it is somehow illegal or shady. In fact, it is 100% legal for Americans to hold financial assets in a Swiss bank account, and there are some incredible perks that come with having a Swiss investment account as an American, which you can learn more about by reading our blog here: The Benefits of Swiss Asset Management for Americans. However, for today's blog, we will focus on the safety and privacy benefits Americans can reap from having an investment account in Switzerland.
In Swiss Law, individuals' privacy is enshrined in the Swiss constitution in Article 13. The article states that every person has the right to privacy in their private and family life, in their home, and in relation to their mail and telecommunications, as well as the right to be protected against the misuse of their personal data.1 Because of this, Swiss banks and individuals are strongly motivated to ensure their data is protected for themselves and their clients. The article strengthens the long-held tradition of discretion and confidentiality of the Swiss banking system. They see the client's personal financial situation as the most sensitive form of personal data.
Further, to support the security of the banking industry, strict federal laws and regulations guard the privacy of individuals with the Swiss Banking Secrecy Act, which holds banks to strict confidentiality of a client's information. Some experts refer to it as bank customer secrecy, as the act does not protect banks but their customers and their right to share their financial detail with those they wish and not the bank. Bank customer secrecy is deeply embedded in Swiss legal systems, including laws relating to the basic rights of citizens and civil, criminal, banking, and privacy laws.2 It is important to note that the law does not cover assets and funds acquired from illegal activity.
Any bank operating in Switzerland must be licensed by the Swiss Financial Market Supervisory Authority (FINMA). Further, FINMA is a member of the Basel Committee on Banking Supervision and regulates and supervises all Swiss banks and other banks with operations in Switzerland according to the Basel Committee's standards. These standards cover equity and capital adequacy and the entire scope of prudential and conduct rules. Moreover, as an additional safety measure, Swiss law demands capital adequacy standards that are even higher than those required by the Basel Capital Accord. Swiss banks can, therefore, certainly be counted among the safest in the world.3 You can learn more about the Basel Committee's standards here: The Basel Framework.
All banks operating in Switzerland must be a part of the "deposit protection scheme" similar to the FDIC in the U.S. The deposit protection scheme is set up to protect deposits of up to CHF 100,000 per client should a bank or security firm declare bankruptcy.4 It is a crucial regulation to ensure the safety of customers and their assets being held in the country for residents and non-residents using Swiss banking services.
There are two other aspects that help to make using Swiss banks safe, and these are in relation to its economy and currency. The Swiss franc (CHF) has become a safe haven currency for turbulent times and a currency that holds its value in both good and poor economic cycles. Our long-term expectation is that the Swiss franc will appreciate in relation to the USD. This is in part because of the incredibly high debt levels of the U.S. federal government. The current debt to GDP of the U.S. is estimated to be 137.2%.5 The out-of-control debt is a stark difference from that of Switzerland, as was mentioned earlier; the debt to GDP ratio is 41.4%.6 Further, investors look to the Swiss franc as an investment when political changes or economic challenges affect their home country.7 These two factors help to provide a stable and safe environment for banks operating in Switzerland.
Privacy and safety are two of the top priorities that people should consider when dealing with their hard-earned wealth. Swiss Banks offer some incredible options for Americans looking to diversify their wealth structure and gain access to professionals that can help them find attractive investment opportunities for capital preservation in one of the best economies and safest private banking systems in the world. While there are a lot of considerations to take when moving assets offshore, two of the top priorities should be privacy and safety. These two issues can never be more stressed in a time when data is used as a commodity sold to the highest bidder, especially when it comes to your financial information and the preservation of your wealth's value.
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