Why Do Rich People Use Swiss Banks?

Swiss banks are not the same today as they used to be some twenty years ago. The most significant changes concern the decreased level of account holders’ confidentiality. Anonymous bank accounts in Switzerland are a thing of the past now.

Switzerland, along with many other countries, has joined the CRS (Common Reporting Standards) group and now it exchanges the financial information about the clients of its banks with other countries. The goal of the CRS initiative is to combat tax evasion and money laundering.

The following question may arise: Why do millionaires from all over the world keep opening accounts in Swiss banks notwithstanding the global crisis, the sanctions, and the availability of their financial information to the fiscal authorities in their home countries? I will answer this question below.??

What has changed in the Swiss banking system?

Before I get to this issue, we have to go back in history and see what the Swiss banking system looked like in the middle of the 20th century. Back then, Swiss banks were the most secure financial institutions as far as information secrecy is concerned. Millionaires, billionaires, oligarchs, and large corporations kept their money in Swiss banks and never worried about their capital’s safety. Nobody could get hold of the money kept in a Swiss bank. Nobody would even know that it was there.?

Swiss banks had spent years and years earning themselves a reputation of strongholds that protected their clients’ information as securely as possible. Disclosure of banking information was a punishable offense and the bank officer found guilty of it could face a prison sentence.

Interestingly, the strict laws protecting banking information have not changed in Switzerland but they have changed in the world. The international community has had to make a choice between personal freedom and security. Due to the threat of terrorist attacks, some personal freedom has had to be sacrificed. Bank account holders do not enjoy the same level of information confidentiality as they used to some time ago. No bank will open an account for a non-identified customer in 2023. No serious bank will provide services to a person or a company from a sanctioned country. Many banks will deny services to offshore-registered companies too.

Switzerland has signed agreements on the automatic exchange of information with about a dozen countries. In addition to that, the country has submitted to the IRS terms and agreed to act in conformity with the FATCA rules. This means that Swiss banks report the financial information about their US customers to the American Internal Revenue Service. No one can hide their money in Swiss banks any longer. The bank managers will have the client’s identity and they will disclose his/ her banking information to authorized government agencies such as fiscal authorities, for example, on their official request. They have to play by the new rules.

Please note that an offshore trust is an efficient legal instrument of protecting your assets from sanctions and illegal expropriation.

Why millionaires prefer banking in Switzerland

The main reasons why wealthy people from different parts of the world continue opening accounts with Swiss banks are the following:

● ? ? ? Low level of financial risks: the Swiss economy remains steady notwithstanding the economic hurricanes and tornadoes raging elsewhere, the inflation rate is close to zero, and the Swiss franc is probably the most stable currency in the world.

● ? ? ? High level of confidentiality and asset protection: Swiss laws disallow the banks to disclose the names of account holders and the information about account balances unless it is required in accordance with the CRS and FATCA rules, or unless the information is needed to identify a criminal.

Other advantages of banking in Switzerland include the following ones:

● ? ? ? Neutral political atmosphere in the country: the Swiss Government participates in no geopolitical conflicts and provides for maximum protection of its country’s economy from global crises.

● ? ? ? Swiss banks have high levels of capitalization and they rank exceptionally high among the most reliable banks in the world.

● ? ? ? The money kept in a Swiss bank is perfectly secure because even if the bank fails, all the deposits will be insured.

These are the main reasons why millionaires from different countries choose to set up accounts in Swiss banks.

What about the negative interest rates?

The situation when a bank offers a negative interest on deposits can be rather astounding, at the first glance. You lend money to the bank, the bank uses it to make a loan to another person and it charges him or her some interest on the loan but you are getting no share of the bank’s profit! Moreover, you have to pay the bank for keeping your money! Does it make any sense? As a matter of fact, it does.?

Suppose you put $100 in a bank in another European country and the interest on your deposit is, say, 2%. At the end of the year, you will have $100 and $2 in your account but the dollar purchasing power will become much lower due to inflation.

This means that you have put the money in the bank at a negative interest anyway. Even if you can find higher interest rates somewhere, the rate of inflation is going to be much greater than 2 or 3 percent per year in any case if you rely on US dollars.

It is true that some (though not all) Swiss banks offer negative interests on deposits. But if you pay a bit for keeping your money in Swiss francs, you will end up losing less than you would lose if you kept your money in US dollars or another currency.

Thus, opening a franc account with a Swiss bank makes economic sense for the following reasons:

● ? ? ? The negative interest will be compensated for by the close-to-zero rate of inflation in Switzerland. Besides, your money is going to be 100% secure in a Swiss bank.

● ? ? ? In addition to that, you can open an investment account and hire an external asset management company. With wise investments, the asset managers will earn enough for you to cover whatever you have to pay to the bank and even more. There are ways of making money with Swiss bans too!

So if you look deeper into the issue, you will understand why millionaires keep their money in Swiss banks even though the interest on the deposit can be negative.

Swiss banks for millionaires

If you are a wealthy individual and you are looking for a foreign country where you could open a bank account, you should probably choose Switzerland. Swiss banks are beyond comparison for protecting your assets and keeping your financial information confidential. I have to issue a warning at this point, however. You have to be certain that you will be able to conclusively show to the Swiss bankers that the money that you are planning to deposit has been acquired in strict conformity with the law. I also hope that you do not come from a sanctioned country and do not have business connections with sanctioned companies or individuals. If this is the case, banking in Switzerland is going to be highly problematic for you if not impossible. Such is the reality these days.

In today’s troubled world, finding reliable mechanisms of asset protection and diversification has become a top priority for a great number of well-to-do people from different countries of the world. The choice of such mechanisms is diverse and you will be well advised to seek expert advice on the matter. I will gladly help you choose the country to open a foreign bank account depending on your primary goals and the country of your origin.?