Private Banking and the Regulatory Framework Today — a part of the book Basel as an International Financial Centre by Dr Alexander Ressos.
Part E turns from history to the present. It describes the banks, the asset managers and the trust companies that make up the Basel financial centre today, the rules under which they operate and the transformation that these rules have undergone since the beginning of the twenty-first century. Three developments dominate this period. The first is the concentration of Swiss banking, which culminated in the collapse of Credit Suisse in 2023 and its takeover by UBS, a bank whose roots lie partly in Basel. The second is the transformation of financial regulation after the global financial crisis of 2008, which brought new capital requirements, new rules for systemically important banks, a new regime for financial services and a new supervision of asset managers and trustees. The third is the end of banking secrecy towards foreign tax authorities, which forced Swiss private banking to reinvent its business model.
Chapter I describes the banking landscape of Basel. Chapter II examines the supervisory framework within which its institutions operate. The following chapters turn to the fight against money laundering (Chapter III), the end of banking secrecy for foreign tax purposes (Chapter IV) and wealth planning, trusts and foundations from the perspective of a practitioner in Basel (Chapter V).
This part belongs to Basel as an International Financial Centre by Dr Alexander Ressos, published here in full, section by section.
The Basel Banking Landscape — conclusion
The Basel banking landscape today comprises the Basel seat of UBS, the cantonal banks of the two half-cantons, a group of traditional private banks, Bank J. Read more Basel · Private Banking and the Regulatory Framework TodayA financial centre in the shadow of Zurich
Basel is the second-oldest banking city of Switzerland after Geneva and the seat of the oldest international financial institution in the world, although Zurich and Geneva both exceed it in size as… Read more Basel · Private Banking and the Regulatory Framework TodayUBS: the Basel root of the largest Swiss bank
In December 1997, the Swiss Bank Corporation of Basel and the Union Bank of Switzerland of Zurich announced their merger. Read more Basel · Private Banking and the Regulatory Framework TodayThe collapse of Credit Suisse
Credit Suisse was founded in Zurich in 1856 by Alfred Escher as the Schweizerische Kreditanstalt, as Part D described. Read more Basel · Private Banking and the Regulatory Framework TodayThe cantonal banks of Basel
The Basler Kantonalbank and the Basellandschaftliche Kantonalbank, founded in 1899 and 1864, remain the principal banks of the domestic economy of the two half-cantons. Read more Basel · Private Banking and the Regulatory Framework TodayThe private banks
Basel has a group of private banks of long standing. La Roche & Co Banquiers, founded in 1787, is one of the oldest private banks in Switzerland and still bears the name of the family that founded… Read more Basel · Private Banking and the Regulatory Framework TodayAsset managers, trustees and family offices
Alongside the banks, the Basel financial centre includes a large number of independent asset managers, trust companies and family offices. Read more Basel · Private Banking and the Regulatory Framework TodayForeign banks and the international presence
Basel hosts relatively few foreign banks compared with Zurich and Geneva. Most foreign banks that want to serve Swiss clients or to manage the wealth of international clients in Switzerland establish… Read more Basel · Private Banking and the Regulatory Framework TodayThe pharmaceutical treasuries as financial actors
A distinctive feature of the Basel financial centre is the presence of the treasury departments of Roche and Novartis. Read more Basel · Private Banking and the Regulatory Framework TodayPension funds and institutional investors
The pension funds of the Basel region, among them the pension funds of Roche, Novartis and the canton of Basel-Stadt, are among the largest institutional investors in the region. Read more Basel · Private Banking and the Regulatory Framework TodayThe too-big-to-fail debate after 2023
The takeover of Credit Suisse by UBS created a bank whose balance sheet is roughly twice the gross domestic product of Switzerland and whose failure would exceed the capacity of the Swiss state to… Read more Basel · Private Banking and the Regulatory Framework TodayBasel as a centre of banking policy
Basel's importance for the financial centre derives above all from the institutions that shape banking policy. Read more Basel · Private Banking and the Regulatory Framework TodayThe cum-ex affair and the limits of custody
The cum-ex affair, which shook the German financial system in the 2010s, reached Basel through the involvement of Swiss banks and investors. Read more Basel · Private Banking and the Regulatory Framework TodayThe Basler Kantonalbank and the Bank Cler group
The Basler Kantonalbank was established by the canton of Basel-Stadt in 1899 to provide the urban population and local trade with savings facilities, mortgages and commercial credit on sound terms. Read more Basel · Private Banking and the Regulatory Framework TodayThe Basellandschaftliche Kantonalbank and the regional banks
The Basellandschaftliche Kantonalbank, founded in 1864 with its head office in Liestal, is older than its counterpart in the city. Read more Basel · Private Banking and the Regulatory Framework TodayThe Swiss Bankers Association, a Basel foundation
The Swiss Bankers Association was founded in Basel in 1912 as the Schweizerische Bankiervereinigung. Read more Basel · Private Banking and the Regulatory Framework TodayThe Basel stock exchange and its absorption into SIX
Basel had its own stock exchange for more than a century. Organised trading in securities developed in the city in the nineteenth century, and a formal exchange under cantonal regulation was… Read more Basel · Private Banking and the Regulatory Framework TodayEmployment, value added and the insurance link
The weight of the financial sector in the economy of Basel-Stadt is smaller than in Zurich or Geneva. Read more Basel · Private Banking and the Regulatory Framework TodayCross-border clients and the trinational workforce
The labour market of Basel extends into Germany and France. Tens of thousands of cross-border commuters from southern Baden and the Haut-Rhin work in the two Basel half-cantons, many of them in the… Read more Basel · Private Banking and the Regulatory Framework TodayFinancing the life sciences and the digital bank
The life sciences cluster of the Basel region is among the most important in the world. Read more Basel · Private Banking and the Regulatory Framework TodaySupervision: FINMA, the Banking Act, FinSA and FinIA — conclusion
The Swiss financial market is supervised by FINMA, an integrated authority created in 2009, which relies on audit firms for a large part of its supervision and, for portfolio managers and trustees,… Read more Basel · Private Banking and the Regulatory Framework TodayAn integrated supervisor
Since 1 January 2009, the Swiss financial market has been supervised by a single authority, the Swiss Financial Market Supervisory Authority, FINMA. Read more Basel · Private Banking and the Regulatory Framework TodayThe Swiss model of dual supervision
FINMA relies to a large extent on the audit firms that the supervised institutions appoint. Read more Basel · Private Banking and the Regulatory Framework TodayThe licence and its conditions
The Banking Act requires every institution that accepts deposits from the public on a professional basis, or that refinances itself with several banks to finance an unlimited number of persons, to… Read more Basel · Private Banking and the Regulatory Framework TodayCapital: the implementation of Basel III
The capital requirements for Swiss banks are set out in the Capital Adequacy Ordinance, which implements the standards of the Basel Committee on Banking Supervision. Read more Basel · Private Banking and the Regulatory Framework TodayLiquidity and the lessons of 2023
The liquidity of banks, their capacity to meet their obligations when depositors withdraw their funds, is regulated by the Liquidity Ordinance. Read more Basel · Private Banking and the Regulatory Framework TodayToo big to fail
The financial crisis of 2008 and the rescue of UBS led Switzerland to adopt a special regime for systemically important banks, known as the too-big-to-fail regime, which entered into force in 2012. Read more Basel · Private Banking and the Regulatory Framework TodayThe Swiss finish
Switzerland has often implemented international standards with requirements that go beyond the international minimum, a practice known as the Swiss finish. Read more Basel · Private Banking and the Regulatory Framework TodayFinSA and FinIA: a new architecture
On 1 January 2020, two new laws entered into force that transformed the regulation of financial services and financial institutions in Switzerland: the Financial Services Act, FinSA, and the… Read more Basel · Private Banking and the Regulatory Framework TodayClient segmentation and the duties of conduct
The Financial Services Act distinguishes between three categories of clients: retail clients, professional clients and institutional clients. Retail clients receive the highest level of protection. Read more Basel · Private Banking and the Regulatory Framework TodayProspectuses, key information documents and the author's theme
The Financial Services Act introduced a uniform prospectus regime for public offerings of securities and for the admission of securities to trading. Read more Basel · Private Banking and the Regulatory Framework TodayOmbudsman, dispute resolution and the client adviser register
The Financial Services Act requires financial service providers to join an ombudsman office recognised by the Federal Department of Finance, unless they serve only institutional and professional… Read more Basel · Private Banking and the Regulatory Framework TodayCrypto-assets and digital assets
Switzerland has been one of the first jurisdictions to develop a legal framework for crypto-assets and digital assets. Read more Basel · Private Banking and the Regulatory Framework TodayCross-border services and market access
The Swiss regulation of cross-border financial services is liberal in one direction and constrained in the other. Read more Basel · Private Banking and the Regulatory Framework TodayFINMA's enforcement toolkit and the debate on fines
FINMA separates its ongoing supervision from enforcement. Supervision consists of the regular dialogue with the institutions, the review of their reports, the on-site reviews and the work of the… Read more Basel · Private Banking and the Regulatory Framework TodayThe guarantee of irreproachable conduct in practice
The guarantee of irreproachable business conduct appears in the Banking Act and, in similar terms, in the Financial Institutions Act, the Insurance Supervision Act and the Financial Market… Read more Basel · Private Banking and the Regulatory Framework TodayDeposit protection and the reform of esisuisse
Switzerland protects bank deposits through a system that combines a statutory privilege in bankruptcy with the self-regulation of the banks. Read more Basel · Private Banking and the Regulatory Framework TodayThe reform agenda after Credit Suisse
The previous chapter described the debate on the capital requirements for UBS that followed the takeover of Credit Suisse. From the perspective of supervision, the reform agenda reaches further. Read more Basel · Private Banking and the Regulatory Framework TodayThe Swiss National Bank and financial stability
The National Bank Act entrusts the Swiss National Bank with the task of contributing to the stability of the financial system. Read more Basel · Private Banking and the Regulatory Framework TodayInnovation, outsourcing and operational resilience
Switzerland has tried to adapt its banking regulation to new business models. Since 2017, the Banking Ordinance has allowed companies to accept public deposits of up to one million francs without a… Read more Basel · Private Banking and the Regulatory Framework TodaySelf-regulation and sustainable finance
The Swiss Bankers Association in Basel, whose history Part D described, has developed self-regulatory rules in many areas of banking. Read more Basel · Private Banking and the Regulatory Framework TodayFINMA and foreign supervisors
A financial centre whose institutions operate worldwide depends on cooperation between supervisors. Read more Basel · Private Banking and the Regulatory Framework TodayAnti-Money Laundering: AMLA, CDB and Beneficial Ownership — conclusion
The Swiss anti-money laundering regime was built in response to scandals. The Chiasso affair of 1977 led to the first agreement on due diligence of the banks. Read more Basel · Private Banking and the Regulatory Framework TodayFrom discretion to due diligence
For most of the twentieth century, the Swiss financial centre regarded the origin of its clients' assets as their private affair. Read more Basel · Private Banking and the Regulatory Framework TodayThe scandals that made the rules
The Swiss anti-money laundering regime was built in response to a series of scandals. The first was the Chiasso affair of 1977. Read more Basel · Private Banking and the Regulatory Framework TodayThe criminal offence of money laundering
Article 305bis of the Swiss Criminal Code has been in force since 1 August 1990. It punishes anyone who carries out an act that is capable of frustrating the identification of the origin, the tracing… Read more Basel · Private Banking and the Regulatory Framework TodayThe Anti-Money Laundering Act of 1997
The Anti-Money Laundering Act, adopted in 1997 and in force since 1 April 1998, established the administrative law framework for the prevention of money laundering. Read more Basel · Private Banking and the Regulatory Framework TodaySelf-regulation and supervision
The Swiss anti-money laundering regime combines state supervision with self-regulation. Read more Basel · Private Banking and the Regulatory Framework TodayBeneficial ownership
The identification of the beneficial owner is the core of modern anti-money laundering regulation. Read more Basel · Private Banking and the Regulatory Framework TodayTax offences as predicate offences
The most significant change to the Swiss anti-money laundering regime in the 2010s was the inclusion of serious tax offences among the predicate offences of money laundering. Read more Basel · Private Banking and the Regulatory Framework TodayPolitically exposed persons and illicit assets
Politically exposed persons, persons who hold or have held prominent public functions, and their family members and close associates are exposed to particular risks of corruption. Read more Basel · Private Banking and the Regulatory Framework TodayMutual legal assistance and the cooperation of authorities
The fight against money laundering requires cooperation across borders. Because assets of criminal origin are often transferred through several countries, tracing them requires information from banks… Read more Basel · Private Banking and the Regulatory Framework TodaySanctions
Since the Russian invasion of Ukraine in February 2022, sanctions have become one of the central concerns of the Swiss financial centre. Read more Basel · Private Banking and the Regulatory Framework TodayThe Financial Action Task Force and Switzerland
The Financial Action Task Force, an intergovernmental body founded by the G7 in 1989 with its secretariat at the OECD in Paris, sets the international standards for the fight against money laundering… Read more Basel · Private Banking and the Regulatory Framework TodayThe practitioner's view
The Swiss anti-money laundering regime is today one of the most demanding in the world. Read more Basel · Private Banking and the Regulatory Framework TodayThe Basel Institute on Governance
Few cities can claim an institution devoted entirely to the study and prevention of corruption and financial crime. Basel can. Read more Basel · Private Banking and the Regulatory Framework TodayAsset recovery in practice
The Swiss policy of asset recovery, which the section on politically exposed persons introduced, developed through a series of cases that tested the limits of the law. Read more Basel · Private Banking and the Regulatory Framework TodayThe Wolfsberg Group and private-sector standards
Alongside the law and the self-regulation of national associations, the global banks have developed their own standards. Read more Basel · Private Banking and the Regulatory Framework TodayDealers, real estate and the art market
The anti-money laundering regime was originally designed for financial intermediaries. Read more Basel · Private Banking and the Regulatory Framework TodayAdvisers, lawyers and professional secrecy
The most controversial element of the recent reform package was the extension of due diligence duties to advisers. Read more Basel · Private Banking and the Regulatory Framework TodayCrypto-assets and digital assets
Crypto-assets and digital assets present the anti-money laundering regime with a new kind of challenge. Read more Basel · Private Banking and the Regulatory Framework TodayDe-risking and the burden on clients
The demanding Swiss regime has a side that is rarely discussed in legislation but felt daily by clients: the decision of banks to avoid risks by avoiding clients. Read more Basel · Private Banking and the Regulatory Framework TodayThe End of Banking Secrecy for Foreign Clients — conclusion
For seventy-five years after 1934, banking secrecy and the Swiss distinction between tax evasion and tax fraud protected foreign clients who held undeclared assets in Swiss banks. Read more Basel · Private Banking and the Regulatory Framework TodayA pillar that seemed permanent
For seventy-five years after the Banking Act of 1934, banking secrecy was regarded in Switzerland as a pillar of the financial centre and of the national identity. Read more Basel · Private Banking and the Regulatory Framework TodayEvasion and fraud: the Swiss distinction
The core of the Swiss position was a legal distinction. Swiss tax law distinguishes between tax evasion, the failure to declare income or assets, and tax fraud, the use of forged, falsified or false… Read more Basel · Private Banking and the Regulatory Framework TodayThe European Savings Tax Agreement
The first breach in the system came from the European Union. In 2003, the European Union adopted the Savings Taxation Directive, which provided for the automatic exchange of information on interest… Read more Basel · Private Banking and the Regulatory Framework TodayThe UBS case
The decisive blow came from the United States. In 2007, Bradley Birkenfeld, an American private banker who had worked for UBS in Geneva, approached the American authorities and revealed that UBS had… Read more Basel · Private Banking and the Regulatory Framework TodayThe OECD standard and the grey list
The UBS case coincided with a global offensive against tax havens. In the wake of the financial crisis, the G20, meeting in London in April 2009, declared that the era of banking secrecy was over and… Read more Basel · Private Banking and the Regulatory Framework TodayData theft and the purchase of stolen data
The collapse of banking secrecy was accelerated by the theft of client data. In 2008, the German tax authorities purchased from a former employee of the Liechtenstein bank LGT a set of data on German… Read more Basel · Private Banking and the Regulatory Framework TodayThe Rubik agreements
Switzerland tried to save banking secrecy for existing relationships by proposing an alternative to the exchange of information: final withholding tax agreements, known as Rubik agreements. Read more Basel · Private Banking and the Regulatory Framework TodayThe United States Program for Swiss Banks
The UBS case was followed by investigations of other Swiss banks by the American Department of Justice. Read more Basel · Private Banking and the Regulatory Framework TodayFATCA
In parallel with the investigations, the United States adopted a law that would make the exchange of information automatic. Read more Basel · Private Banking and the Regulatory Framework TodayThe automatic exchange of information
FATCA inspired a global standard. In 2014, the OECD adopted the Common Reporting Standard for the automatic exchange of financial account information, under which financial institutions identify the… Read more Basel · Private Banking and the Regulatory Framework TodayWhat remains of banking secrecy
Banking secrecy has not disappeared entirely. Article 47 of the Banking Act still makes the disclosure of client information by bank employees a criminal offence. Read more Basel · Private Banking and the Regulatory Framework TodayConsequences for private banking
The end of banking secrecy for foreign clients transformed Swiss private banking. Clients with undeclared assets had to regularise them through voluntary disclosure programmes in their home… Read more Basel · Private Banking and the Regulatory Framework TodayThe origins of banking secrecy and the founding myth
The confidentiality of the banker towards his client is older than the Banking Act. Read more Basel · Private Banking and the Regulatory Framework TodayThe white money strategy and the Swiss Bankers Association
Once the decision of 13 March 2009 had been taken, the Federal Council needed a strategy for a financial centre whose business with undeclared foreign assets had lost its legal protection. Read more Basel · Private Banking and the Regulatory Framework TodayVoluntary disclosure in the neighbouring countries
The end of banking secrecy created a demand that the tax laws of the neighbouring countries had to meet. Read more Basel · Private Banking and the Regulatory Framework TodayThe Swiss domestic amnesties of 2010
Switzerland also reformed its own law. With effect from 1 January 2010, the Federal Act on the Simplification of Subsequent Taxation in Cases of Succession and on the Introduction of Penalty-Free… Read more Basel · Private Banking and the Regulatory Framework TodayThe transfer of employee data to the United States
The American investigations raised a problem that went beyond the protection of clients. Read more Basel · Private Banking and the Regulatory Framework TodayAdministrative assistance after 2009
The adoption of the OECD standard required a new procedural framework. After first applying an ordinance, Switzerland adopted the Federal Act on International Administrative Assistance in Tax… Read more Basel · Private Banking and the Regulatory Framework TodayLeaks and the end of opaque structures
After 2009, the end of banking secrecy for accounts in a client's own name did not immediately end the use of more complex structures. Read more Basel · Private Banking and the Regulatory Framework TodayRegularisation from the client's perspective
For the individual client, the end of banking secrecy was experienced as a sequence of letters. Read more Basel · Private Banking and the Regulatory Framework TodayWealth Planning, Trusts and Foundations from Basel — conclusion
Wealth planning has become the core of the value proposition of the Basel private banks since the end of banking secrecy for foreign clients. Read more Basel · Private Banking and the Regulatory Framework TodayFrom safekeeping to planning
When banking secrecy ended for foreign clients, the Swiss private banks had to find a new justification for their fees. Read more Basel · Private Banking and the Regulatory Framework TodayThe Swiss foundation
The foundation is the oldest instrument of Swiss wealth planning. Under Article 80 of the Civil Code, a foundation is created by the dedication of assets to a particular purpose. Read more Basel · Private Banking and the Regulatory Framework TodayTrusts and the Hague Convention
Switzerland is a civil-law country without a domestic law of trusts. Swiss banks, trust companies and lawyers have nonetheless administered trusts for decades, because their international clients… Read more Basel · Private Banking and the Regulatory Framework TodayThe debate on a Swiss trust
For the last decade Switzerland has debated whether to introduce a trust into its own law. The motion of Parliament in 2018 instructed the Federal Council to create the legal basis for a Swiss trust. Read more Basel · Private Banking and the Regulatory Framework TodayTaxation of wealthy individuals
The taxation of wealthy individuals is shaped by the federal structure of Switzerland. The Confederation levies a direct income tax, but no federal wealth tax and no federal inheritance tax. Read more Basel · Private Banking and the Regulatory Framework TodayThe JUSO initiative and the future of inheritance taxation
In 2024, the youth wing of the Social Democratic Party submitted a popular initiative for a federal inheritance and gift tax of fifty per cent on estates and gifts above fifty million francs, with… Read more Basel · Private Banking and the Regulatory Framework TodayLife insurance as a planning tool
Life insurance has long been a planning instrument for wealthy families in continental Europe. Read more Basel · Private Banking and the Regulatory Framework TodayPhilanthropy
Philanthropy is a central part of wealth planning in Basel, as the earlier description of the city's foundations suggests. Read more Basel · Private Banking and the Regulatory Framework TodayThe reform of Swiss succession law
Swiss succession law has been modernised in two stages. The first stage, which entered into force on 1 January 2023, reduced the compulsory shares of descendants and abolished the compulsory share of… Read more Basel · Private Banking and the Regulatory Framework TodayThe European Succession Regulation
The European Succession Regulation, applicable since 17 August 2015 in all member states of the European Union except Denmark and Ireland, determines the law applicable to succession and the… Read more Basel · Private Banking and the Regulatory Framework TodayMatrimonial property and the family
Wealth planning does not stop at the law of succession. Matrimonial property law determines how the assets of spouses are divided on divorce or death, and in an international family several… Read more Basel · Private Banking and the Regulatory Framework TodayFamily governance
The largest risk to a family fortune is often the family itself. Studies of family businesses and family wealth suggest that many fortunes do not survive the third generation, usually because of… Read more Basel · Private Banking and the Regulatory Framework TodayFamily offices in Basel
A family office is an organisation that manages the affairs of one family or of several families. Read more Basel · Private Banking and the Regulatory Framework TodayThe advisers
Wealth planning in Basel is practised by a network of professions: private bankers and their wealth planning departments, independent asset managers, trustees, lawyers, notaries, tax advisers and… Read more Basel · Private Banking and the Regulatory Framework TodayCompliance in wealth planning
The end of banking secrecy changed wealth planning as profoundly as it changed private banking. Read more Basel · Private Banking and the Regulatory Framework TodayArt and collections in wealth planning
For many wealthy families in Basel, the most personal part of the estate hangs on the walls. Read more Basel · Private Banking and the Regulatory Framework TodayCrypto-assets and digital assets in succession planning
Crypto-assets and digital assets have become a regular part of the estates that wealth planners in Switzerland handle, and the author advises on them as one of the fields of his practice. Read more Basel · Private Banking and the Regulatory Framework TodayPension planning for wealthy individuals
Of the three pillars on which the Swiss pension system rests, the second and third offer planning options that wealthy residents of Basel use regularly. Read more Basel · Private Banking and the Regulatory Framework TodayReal estate in the canton
Real estate, which is part of almost every large estate, is subject in Basel to two layers of rules that foreign families should understand before they buy. The first is federal. Read more Basel · Private Banking and the Regulatory Framework TodayMoving to Basel as a wealthy family
Families who consider moving to Basel often begin with practical questions and only later reach the legal ones. Read more