UBS deal cracks door on banking secrecy worldwide
The amount of global wealth stashed in tax-haven nations is staggering and largely uncontrolled, financial experts say. Here's a backgrounder.
Wednesday's agreement by Swiss bank UBS to divulge details of 4,450 accounts to the US Internal Revenue Service has put a crowbar into the door of Switzerland's long tradition of bank secrecy. But it's just a small opening. The amount of global wealth stashed in tax-haven nations is staggering and largely uncontrolled, financial experts say. Here's a brief backgrounder:
How did Switzerland become bank-secrecy central?
Maintaining a strong record of client confidentiality helped to pave Switzerland's way to financial success, becoming a lure for financial assets. Coupled with the Swiss franc's reputation as a reliably firm currency, this has made Zurich a world banking center – with UBS and Credit Suisse among the best-known firms. The tradition of secrecy gained a firm legal rooting in 1934, as part of broader Depression-era bank regulations. Under the provision on secrecy, bankers could face criminal sentences for divulging client information.
It's a controversial practice – and never more so than during the era surrounding World War II. Many German Jews were able to protect assets in Swiss accounts, but bank secrecy also played a role in Switzerland's economic cooperation with the Nazi regime, historians say.