The due diligence agreement of 1977 (CDB 77)

The National Bank's initiative

The agreement that the Swiss banks concluded in the weeks after Chiasso had been under discussion before the scandal broke. In its annual report for 1977, the Swiss National Bank explained that its Governing Board had "for some time" sought to lay down some principles on the conduct of banks towards their clients, "in view of the rapid expansion of the Swiss financial centre in recent years and out of concern for the good reputation of the Swiss banks".¹ The National Bank's interest was partly monetary. In the 1970s the inflow of foreign money into Swiss francs pushed up the exchange rate, and the National Bank defended the franc with a ban on the payment of interest on foreign deposits and related restrictions, which it tightened again in September 1977 by limiting forward sales of francs by banks to foreigners. Banks that actively solicited flight capital worked against these measures. Its interest was also reputational, since the National Bank regarded the good name of the financial centre as a public concern.

The Chiasso affair turned a negotiation into an urgent project. On 2 June 1977 the banks domiciled in Switzerland and the Swiss Bankers Association on one side and the National Bank on the other concluded the "Agreement on the duty of diligence in accepting funds and on the handling of banking secrecy" (Vereinbarung über die Sorgfaltspflicht bei der Entgegennahme von Geldern und die Handhabung des Bankgeheimnisses). It entered into force on 1 July 1977 and was concluded initially for five years.² Its purpose, in the words of the National Bank, was "to ensure that the identity of bank clients is reliably established and to prevent undesirable or criminal acts from being made possible or facilitated through the abusive use of banking secrecy".³ The agreement became known by its German abbreviation VSB and, in English, as the Code of Conduct with regard to the exercise of Due Diligence, or CDB.

The Federal Banking Commission was deliberately not a party. As the supervisory authority, it explained, it could not make agreements with the institutions it supervised about the interpretation of the statute. It welcomed the agreement, however, because it provided "a description of disapproved banking practices" that made the Commission's own supervision easier.⁴ This arrangement established a division of labour that has lasted, in modified form, to the present day: the banks set the detailed rules of conduct in a private agreement, while the supervisory authority treats compliance with those rules as an element of the guarantee of irreproachable business conduct under the Banking Act.

Notes

1. Swiss National Bank, Geschäftsbericht 1977 (above), 13: "aus Besorgnis um den guten Ruf der Schweizer Banken hatte das Direktorium bereits seit längerer Zeit angestrebt, einige Grundsätze über das Verhalten der Banken gegenüber ihren Kunden festzulegen"; ibid., 13 ("gegen Ende September die gegen die Umgehung des Verzinsungsverbotes gerichteten Einschränkungen für Frankenterminverkäufe der Banken an Ausländer weiter verschärft"). ↩
2. EBK, Jahresbericht 1977 (above), 18–20 ("am 2. Juni 1977 zwischen den in der Schweiz domizilierten Banken und der Schweizerischen Bankiervereinigung einerseits und der Nationalbank andererseits abgeschlossenen Vereinbarung über die Sorgfaltspflicht bei der Entgegennahme von Geldern und die Handhabung des Bankgeheimnisses"); SNB, Geschäftsbericht 1977 (above), 13 ("Sie trat auf den 1. Juli in Kraft und gilt vorerst für fünf Jahre"). ↩
3. SNB, Geschäftsbericht 1977 (above), 13: "Sie soll sicherstellen, dass die Identität der Bankkunden zuverlässig abgeklärt wird, und verhindern, dass unter missbräuchlicher Verwendung des Bankgeheimnisses unerwünschte bzw. strafbare Handlungen ermöglicht oder erleichtert werden." ↩
4. EBK, Jahresbericht 1977 (above), 18–20 ("eine Umschreibung verpönter Bankgeschäfte"). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.