Updated: May 31, 2021
What is Swiss Banking Industry ?
Banking in Switzerland dates to the early eighteenth century through Switzerland's merchant trade and has, over the centuries, grown into a complex, regulated, and international industry. Banking is seen as emblematic of Switzerland, along with the Swiss Alps, Swiss chocolate, watchmaking and mountaineering. Switzerland has a long, kindred history of banking secrecy and client confidentiality reaching back to the early 1700s. Starting as a way to protect wealthy European banking interests, Swiss banking secrecy was codified in 1934 with the passage of the landmark federal law, the Federal Act on Banks and Savings Banks. These laws, which were used to protect assets of persons being persecuted by Nazi authorities, have also been used by people and institutions seeking to illegally evade taxes, hide assets, or generally commit financial crime.
Controversial protection of foreign accounts and assets during World War II sparked a series of proposed financial regulations seeking to temper bank secrecy to little success. Switzerland has been one of the largest offshore financial centers and tax havens in the world since the mid-20th century. Despite an international push to meaningfully roll back banking secrecy laws in the country, Swiss social and political forces have minimized and reverted much of proposed roll backs. Although disclosing criminal activities by banks, who do not enjoy a good reputation even in Switzerland, is generally well seen by the Swiss public, disclosing client information has been considered a criminal offence since the early 1900s.
Employees working in Switzerland and abroad at Swiss banks "have long adhered to an unwritten code similar to that observed by doctors or priests". Since 1934, banking secrecy laws have been violated by four people: Christoph Meili (1997), Bradley Birkenfeld (2007), Rudolf Elmer (2011), and Hervé Falciani (2014).
The Swiss Bankers Association (SBA) estimated in 2018 that Swiss banks held US$6.5 trillion in assets or 25% of all global cross-border assets. Switzerland's main lingual hubs, Geneva (for French), Lugano (for Italian), and Zürich (for German) service the different geographical markets. It consistently ranks in the top three states on the Financial Secrecy Index and was named first many times, most recently in 2018. The two large banks–UBS and Credit Suisse are regulated by the Swiss Financial Market Supervisory Authority (FINMA), and the Swiss National Bank (NSB) which derives its authority from a series of federal statutes.
Banking in Switzerland has historically played, and still continues to play, a dominant role in the Swiss economy and society. According to the Organization for Economic Cooperation and Development (OECD), total banking assets amount to 467% of total gross domestic product.Banking in Switzerland has been portrayed, to varying degrees of accuracy, in overall popular culture, books, movies, and television shows.
I. Banking Secrecy
Swiss banking secrecy was born in Geneva during the 1700s.
Bank secrecy in the Swiss region can be traced to the Great Council of Geneva which outlawed the disclosure of information about the European upper class in 1713. As a way of avoiding the Protestant banking system, Catholic French Kings deposited their holdings in Geneva accounts. During the 1780s, Swiss bank accounts began insuring deposits which contributed to their reputation for financial security. In 1815, the Congress of Vienna formally established Switzerland's international neutrality which led to a large capital influx.
The wealthy, landlocked Switzerland saw banking secrecy as a way to build an empire similar to that of France, Spain, and the United Kingdom. Swiss historian Sébastian Guex notes in The Origins of Secret Swiss Bank Accounts:
This is what the Swiss bourgeoisie are thinking: 'That's our future. We will play on the contradictions between the European powers and, protected by the shield of our neutrality, our arm will be industry and finance.'
After a small scale civil war in the 1840s between the Swiss cantons, the Swiss Federation was founded in 1848. The formation of the state, through a direct democracy, contributed to the political stability needed for banking secrecy. The mountainous terrain of Switzerland provided a natural environment to excavate underground vaults for storage of gold and diamonds. During the 1910s, Swiss bankers traveled to France to advertise its banking secrecy during World War I. The war's contribution to political and economic instability, sparked a rapid capital movement into Switzerland.
Private wealth is best kept in private hands. The state should not be able to dispossess private citizens of their savings.
The Swiss believe in this principle. The rest of the world does not. That is why each and every of the 26 cantons of the Swiss confederation comes with different tax rates.
II. Swiss Banking Law of 1934 - Legalised Secrecy
As European countries began to increase taxes to finance the war, wealthy clients moved their holdings into Swiss accounts to avoid taxation. The French banked in Geneva, the Italians in Lugano, and the Germans in Zurich. While disclosing client information was a civil offence in Switzerland for centuries, the Swiss Federal Assembly made it a federal criminal offence in 1934 with the passage of the landmark legislation, the Federal Act on Banks and Savings Banks. Colloquially known as the Banking Law of 1934 or the Swiss Banking Law of 1934, it codified banking secrecy.
The Federal Assembly enacted the law to quell controversy over the alleged tax evasion of wealthy French businessmen, military generals, and Catholic bishops.An additional provision, Article 47(b), was drafted before its ratification to protect Jewish assets from the Nazi party.
After the 2008 financial crisis, Switzerland signed the European Union Savings Directive (EUSD) which obliges Swiss banks to report to 43 European countries non-identifying annual tax statistics. On December 3, 2008, the Federal Assembly increased the prison sentence for violations of banking secrecy from a maximum of six months to five years.In late 2008, after an international, multi-state investigation into Switzerland's role in U.S. tax evasion, UBS entered into a limited, deferred prosecution agreement (DPA) with the U.S. Department of Justice. The agreement initiated the landmark Birkenfeld Disclosure of information on more than 4,000 clients.
If there is anything the Swiss take more seriously than the precision of their watches or the quality of their chocolate, it's the secrecy of their banks.
— Steve Kroft, host of Banking: A Crack In the Swiss Vault
Pic : International pressure to roll back banking secrecy is seen as an attack on Swiss culture and values. The Swiss parliament expressed an interest in adopting banking secrecy into their constitution in 2017.
In another step toward loosening banking secrecy, Switzerland signed the U.S. Foreign Account Tax Compliance Act (FATCA), after rejecting it twice in parliament. The FATCA requires Swiss banks to disclose non-identifying U.S. client information annually to the Internal Revenue Service. The agreement does not guarantee the semi-automatic information transfers, which remain at the discretion of Swiss government authorities.If a client does not consent to having their information shared with the IRS, Swiss law prohibits the disclosure.
If a client does consent, Swiss banks send the IRS tax-related information about the account holder but are prohibited from disclosing identities pursuant to Article 47 of the Banking Law of 1934. The 2018 Financial Secrecy Index stated: "this does not mean that Swiss banking secrecy was finished, as some excitable news reports suggest… the breach was a partial dent".
In December 2017, the Swiss parliament launched a standing initiative and expressed an interest in formally embedding banking secrecy within the Swiss Constitution making it a federally-protected constitutional right. In January, 2018, a U.S. district court ruled that Swiss bankers " have nothing to do with the choice that an American taxpayer makes to not declare offshore assets", later clarifying they should not be seen as facilitating tax evasion but rather provide a legal service that is made illegal by the client. The Swiss Justice Ministry announced in March 2018 that disclosure of client information in a pending court case involving a Swiss bank is subject to federal espionage and extortion charges in addition to charges relating to banking secrecy laws.
III. An Overview of Two Major Private Banks
1. Credit Suisse at Glance
It all began with Swiss railroads in 1856. When the country needed to finance the expansion of its rail network, the forerunner to Credit Suisse was founded. We have since turned into an integrated bank operating in more than 50 countries around the world.
Credit Suisse's story stretches back to July 5, 1856, when the prominent politician, business leader, and pioneer Alfred Escher founded "Schweizerische Kreditanstalt."
The original purpose of the new bank known as SKA was to finance the expansion of the railroad network as well as the further industrialization of Switzerland. Fourteen years later, the bank's first foreign representative office opened up in New York. In 1905, the bank's first branch outside Zurich opened in Basel following the acquisition of Oberrheinische Bank.
Pic : Alfred Escher ( 1819-1882 )
What started off as a Swiss investment bank turned into a success story spanning over the next century and a half, with Credit Suisse gradually evolving into a leading global provider of financial services.
This development has been achieved through strong organic growth, supplemented by a series of significant mergers and acquisitions such as that of the US investment bank CS First Boston in 1990, the Swiss private bank Leu in 1990, Switzerland's fourth largest bank – Volksbank – in 1993, the Brazilian wealth manager Hedging-Griffo in 2007, and Morgan Stanley's wealth management businesses in Europe, Middle East, and Africa in 2013 to cite a few of the more recent deals.
Pic : Credit Suisse
This has involved the amalgamation of very different cultures, philosophies, and spheres of specialist knowledge, which has resulted in the creation of a strong integrated bank. As of 2006, the bank began operating as a globally active integrated universal bank providing comprehensive solutions to our clients in
Investment Banking and
Typical Dashboard of Credit Suisse
Key figures (as of end-2019)
Year of foundation - 1856 Employees - 47,860 Revenue - CHF 22.48 billion (2019)
Operating income - CHF 4.720 billion (2019)
In 2017, Credit Suisse - CHF 1.376 trillion of assets under management,
Driving innovation - in their Own Words.....
If there is one constant in the story of Credit Suisse, it is a track record of continual innovation. In true pioneering style, we have shaped many of the countless innovations to hit the financial markets over the past one and a half centuries, and have quickly adapted others for our own use.
For example, we were the first large Swiss bank to establish a direct telex connection with New York in 1951.
We continued our pioneering role in the Swiss market by opening the first drive-in bank (1962), and
launching both the first telephone banking service (1993), and
the first internet banking platform (1997).
But our company's history has been shaped by much more than just technological innovations. In the areas of product management, training and development, marketing, and social commitment, Credit Suisse can look back on a long tradition of leading the way for others to follow. As different as the innovations were, they ultimately served a similar aim. In nearly all cases, this was to meet the needs of clients in an even more rapid, professional, and comprehensive way. And it is already clear today that this driving force will also fuel many a future innovation at Credit Suisse.
This is Credit Suisse today.
Credit Suisse Operations in India
Credit Suisse Business Delivery Centers
2. UBS ( Union Bank of Switzerland ) at Glance
Banking in Switzerland has a very long tradition stretching back to medieval times. This heritage may explain the widespread impression both at home and internationally that Switzerland has always been a strong financial center. It is a perception that has repeatedly been reinforced in popular fiction as well as other media. In reality, the size and international reach of Swiss banking were largely a product of the second half of the 20th century and were significantly influenced by the Union Bank of Switzerland and the Swiss Bank Corporation (SBC), the two banks which merged to form UBS in 1998.
Pic : UBS
At the same time, this evolution of modern Swiss banking is firmly founded in the second half of the 19th century. Then, the forebears of both the Union Bank of Switzerland and SBC were established and actively contributed to the building of modern Switzerland’s industrialized economy. First, the Bank in Winterthur was founded in 1862, and in 1912 merged with the Toggenburger Bank to form the Union Bank of Switzerland. Then the Basler Bankverein was founded in 1872 and as a result of various mergers eventually became the Swiss Bank Corporation.
One of the main objectives of the merger that created UBS in 1998 was to establish a truly global firm to give private, corporate, institutional and sovereign clients worldwide access to services and markets, to advice and to the highest quality execution of orders and mandates. As a result of the merger the newly formed UBS was able to benefit from invaluable insight and experience built up over many years and from deeply rooted relationships in several countries.
More recently, UBS’s global roots were substantially strengthened by various acquisitions. Some of the firms acquired by the Union Bank of Switzerland, SBC and UBS in the 1980s, 1990s and 2000s also traced their historical roots back to the 19th century, most notably the US brokerage firm Paine Webber, the foundation upon which today’s UBS Wealth Management Americas is built. Other early examples of the historical heritage of UBS include Phillips & Drew, a predecessor of UBS Global Asset Management, founded in 1895. S.G. Warburg, a key foundation for the development of today’s UBS Investment Bank, was founded some decades later.
This, of course, is far from the end of the UBS story. As this brochure clearly demonstrates, a dynamic approach to change – identifying and exploiting opportunities and rising to meet challenges – has been the mainspring of the firm’s achievements and will continue to drive its future success.
What Is UBS ?
UBS (derived from the Union Bank of Switzerland) is a multinational diversified financial services company headquartered in Zurich and Basel. UBS is involved in virtually all major financial activities, including retail and commercial banking, investment banking, investment management, and wealth management. UBS has a major presence in the United States and has its American headquarters in New York City.
UBS has more than CHF 2.8 trillion in invested assets and is the largest bank in Switzerland. It operates in over 50 countries worldwide, with close to 60,000 employees.
The name UBS is derived from one of its predecessor corporations, the Union Bank of Switzerland. The current UBS originated when the Union Bank of Switzerland merged with the Swiss Bank Corporation. Thus, UBS is now used as the company name, not as an acronym. The UBS logo consists of three keys, a symbol taken from the Swiss Bank Corporation. The keys symbolize confidence, security, and discretion.
UBS’s Major Divisions
UBS has several major divisions, offering products and services to numerous clients. These divisions include wealth management, asset management, investment banking, and retail banking.
UBS wealth management covers both high net worth and ultra high net worth individuals. The division’s financial advisors work with clients to understand the breadth of their financial and other assets and develop tailored solutions to meet their needs. Financial advisors may specialize in services, such as investment management, income tax preparation and/or estate planning.
The investment aim of UBS asset management is to “deliver superior investment performance and client service.” Asset management differs from wealth management in that it can also describe managing collective investments (such as a pension fund) in addition to overseeing individual assets. For this reason, some deem asset management to encompass wealth management.
UBS investment bank is considered one of the bulge bracket banks, along with Goldman Sachs, J.P. Morgan, Morgan Stanley, Citigroup, Barclays, Bank of America Merrill Lynch, Credit Suisse, and Deutsche Bank. Investment banks underwrite new debt and equity securities for all types of corporations, aid in the sale of these securities, and help to facilitate mergers and acquisitions, reorganizations, and broker trades for institutions and private investors. At times, investment banks also provide guidance to issuers regarding the issue and placement of stock.
Typical Dashboard of UBS
Key figures (as of end-2019)
Year of foundation - 1862 Employees - 66,888 Nos
Revenue - US $ 30.21 billion (2018)
Operating income - US $ 5.99 billion (2018 )
Assets : USD 2.85 trillion
UBS retail banking is what many traditionally view as mass-market banking, wherein individual customers use the local branches of larger commercial banks. Other examples of retail bank include Citibank and T.D. Bank. UBS retail bank offers savings and checking accounts, mortgages, personal loans, debit or credit cards, and certificates of deposit (CDs). The focus is on the individual consumer.
Corporate Video of UBS
IV. What is the Central Bank of Switzerland or Swiss National Bank ?
The bank is otherwise known as: German: Schweizerische Nationalbank; French: Banque nationale suisse; Italian: Banca nazionale svizzera; Romansh: Banca naziunala svizra, which are the four official languages of the country.
The SNB is an Aktiengesellschaft under special regulations and has two head offices, one in Bern and one in Zurich.
Pic : Swiss National Bank
1 ) History
Share of the Swiss National Bank, issued 6 June 1907.
The bank formed as a result of the need for a reduction in the number of banks of issue, which numbered 53 sometime after 1826. In the 1874 revision of the Federal Constitution it was given the task to oversee laws concerning the issuing of banknotes. In 1891, the Federal Constitution was revised again to entrust the Confederation with sole rights to issue banknotes. The Swiss National Bank was founded under the law of 6 October 1905 ('the National Bank Act'), which entered into force on 16 January 1906. Business was started on 20 June 1907.
The Federal Council devalued the Swiss Franc during 1936, and as a result there was made available to the National Bank an amount of money, which the bank subsequently stored in a Währungsausgleichsfonds reserve for use in future situations of emergency.
During 1994 , the bank was described as a joint-stock company acting under the administration and supervision of the Confederation. It had eight branches and twenty sub-branches within cantons. The governing board had overall executive management of the National Bank, with supervision entrusted to its shareholders, the banks' council, the banks' committee, its local committees and auditing committee. The three members of the governing board together decided the monetary policy of the National Bank. Towards the end of 1993 it had 566 employees.
With the inception of Article 99 of the Federal Constitution, in May 2004, the National Bank achieved formal independence.
Approximately 55% of the share capital is held by public shareholders (cantons, cantonal banks, etc.). The remaining shares are largely in the hands of private persons. Shares of the SNB have been listed at the SIX Swiss Exchange since 1907.
3) Capping of euro exchange rate
The SNB announced on 6 September 2011 to set a minimum exchange rate of CHF 1.20 per euro and that it would "enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities" in order to take measures to stem the development of a possible recession. The bank stated the 1.20 exchange rate was defendable as the bank could potentially proceed to mint enough banknotes to control the rate sufficiently.
The SNB announced on 15 January 2015 the euro currency arrangement would end as the euro crisis had passed and the Europeans would be making financial policy changes.
4 ) Typical Responsibilities
Pic : Schweizerische Nationalbank (Swiss National Bank), 5 Franken (1914). The portrait depicts William Tell (based on Richard Kissling's monument in Altdorf), with the Rütli Mountain in the distance. Signed by K. Bornhauser (Chief Cashier), Johann-Daniel Hirter (President of the Swiss National Bank Council), and August Burckhardt (Board member).
The basic governing principles of the Nationalbank are contained within Article 99 of the Federal Constitution, which deals with matters of monetary policy. There are three numbered factors concerning principles explicitly mentioning the Nationalbank, of four altogether shown within the Article. The SNB is therefore obliged by constitutional statute law to act in accordance with the economic interests of Switzerland. Accordingly, the prime function of the Nationalbank is:
to pursue a reliable monetary policy for the benefit of the Swiss economy and the Swiss people.
The National Bank publishes within its own site a list of research done as work in progress by staff members, which begin at 2004 (2 papers), to 2005 (2), 2006 (11), 2007 (17), 2008 (19), 2009 (16), 2010 (19), 2011 (14), 2012 (16), 2013 (11), 2014 (13), and to 1 August 2015 there is shown nine papers, a list of eight economic studies which relate to the tasks of the bank, listed from 2005, in addition to a bi-annually published update of research, listed from 2012 to the present.
Cash supply and distribution
The National Bank is entrusted with the note-issuing privilege. It supplies the economy with banknotes that meet high standards with respect to quality and security. It is also charged by the Confederation with the task of coin distribution.
Cashless payment transactions
In the field of cashless payment transactions, the National Bank provides services for payments between banks. These are settled in the Swiss Interbank Clearing (SIC) system via sight deposit accounts held with the National Bank.
Investment of currency reserves
Financial system stability
The National Bank contributes to the stability of the financial system by acting as an arbiter over monetary policy. Within the context of this task, it analyses sources of risk to the financial system, oversees systemically important payment and securities settlement systems and helps to promote an operational environment for the financial sector.
International monetary cooperation
Together with the federal authorities, the National Bank participates in international monetary cooperation and provides technical assistance.
Banker to the Confederation
The Swiss National Bank acts as banker to the Swiss Confederation. It processes payments on behalf of the Confederation, issues money market debt register claims and bonds, handles the safekeeping of securities and carries out money market and foreign exchange transactions.
The National Bank compiles statistical data on banks and financial markets, the balance of payments, the international investment position and the Swiss financial accounts.
Sign asking the Swiss National Bank to divest from fossil fuels, at a climate demonstration in Bern (2019).
According to its guidelines, it "avoids shares in companies which produce internationally banned weapons, seriously violate fundamental human rights or systematically cause severe environmental damage".
Since 2016, environmental associations and academics criticize the fact that these investments do not take into account the Paris Climate Agreement (article 2) and are responsible for at least 50 million tons of carbon dioxide emissions in 2017.
The Swiss National Bank pursues a monetary policy serving the interests of the country as a whole. It must ensure price stability, while taking due account of economic developments. Monetary policy affects production and prices with a considerable time lag. Consequently, it is based on inflation forecasts rather than current inflation.
The SNB's monetary policy strategy consists of three elements: a definition of price stability (the SNB equates price stability with a rise in the national consumer price index of less than 2% per year), a medium-term conditional inflation forecast, and, at operational level, a target range for a reference interest rate, which is the Libor for three-month investments in Swiss francs.
General Meeting of Shareholders
The general meeting of shareholders is held once a year, usually in April. Owing to the SNB's public mandate, the powers of the shareholders' meeting are not as extensive as in joint-stock companies under private law.
The Bank Council oversees and controls the conduct of business by the Swiss National Bank and consists of 11 members. Six members, including the President and Vice President, are appointed by the Federal Council, and five by the Shareholders' Meeting. The Bank Council sets up four committees from its own ranks: an Audit Committee, a Risk Committee, a Remuneration Committee and an Appointment Committee.
A list of the Bank Council members is published on the SNB website
The Swiss National Bank's management and executive body is the governing board. The governing board is responsible in particular for monetary policy, asset management strategy, contributing to the stability of the financial system and international monetary cooperation. The Governing Board consists of three members:
Chairman: Thomas Jordan
Vice Chairman: Fritz Zurbrügg
Member: Andréa M. Maechler
The SNB manages the official gold reserves of Switzerland, which as of 2008 amount to 1,145 tonnes and are valued at 30.5 billion CHF. The gold is believed to be stored in huge vaults beneath the Federal Square (Bundesplatz) to the north of the federal parliament building in Bern, but the SNB treats the location of the gold reserves as a secret. Independent confirmation of the gold's location was obtained by the Bernese newspaper Der Bund in 2008. It published a photograph of the bullion that a keystone photographer was allowed to take at the SNB premises in Bern in 2001. Der Bund also quoted a retired official of the city's surveying office as saying that the gold vaults take up an area of roughly half the Federal Square and have a depth of dozens of meters, down to the level of the Aar river. The SNB says that the gold reserves are stored in different safe places in Switzerland (70% -mostly under the Bundesplatz in Berne and at the Bank for International Settlements in Basel) and abroad (i.e. Bank of England and Bank of Canada).
From the latter years of the 1990s until sometime during 2005, the National Bank transferred from its possession (incompetently, when the gold price was at its historic low) half of its gold reserves, following the Nazi gold affair.
6) World War II
The Swiss National Bank provided 1.2 billion CHF to the Reichsbank, of this, a value of approximately 780 million CHF of the gold given to the National Bank was gold which had been looted by the forces of Germany. In addition the National Bank also exchanged between 1.2–1.6 billion CHF for gold from the Allied forces. During 20 April 1944, gold from the gold reserves of Italy arrived from Como at the railway station within Chiasso.
There is controversy over the role of the Swiss National Bank in the transfer of Nazi gold during World War II. The SNB was the largest gold distribution centre in continental Europe before the war. A study by the U.S. Department of State in 1997 notes that the bank "must have known that some portion of the gold it was receiving from the Reichsbank was looted from occupied countries". This was confirmed by the Swiss Bergier commission in 1998 which concluded that the SNB received US$440 million in gold from Nazi sources, of which US$316 million is estimated to have been looted. The gold from Nazi governship sources was in the form of ingots containing gold looted from central banks of Europe and gold from Jews executed within the concentration camps established by the machination of the Nazi regime, which the SNB took without knowing these facts at the time, nor inquiring to any great degree in the process of its transfer into the possession of the SNB, according to Robert Vogler, a former archivist of the SNB.
7) Monetary policy strategy
Constitutional and legal mandate
Article 99 of the Federal Constitution entrusts the SNB, as an independent central bank, with the conduct of monetary policy in the interests of the country as a whole. The mandate is explained in detail in the National Bank Act (art. 5 para. 1), which requires the SNB to ensure price stability and, in so doing, to take due account of economic developments.
The SNB is thus charged with resolving in the best general interests any conflicts arising between the objective of price stability and business cycle considerations, giving priority to price stability. The requirement to act in the interests of the country as a whole also means that the SNB must gear its policy to the needs of the entire Swiss economy rather than the interests of individual regions or industries.
Significance of price stability
Price stability is an important prerequisite for growth and prosperity. Inflation and deflation, by contrast, impair economic activity. They complicate decision-making by consumers and producers, lead to misallocations of labour and capital, and result in a redistribution of income and wealth.
By seeking to keep prices stable, the SNB creates an environment in which the economy can fully exploit its production potential. The objective of the SNB's monetary policy is to ensure price stability in the medium and long term. Short-term price fluctuations, however, cannot be counteracted by monetary policy.
Appropriate monetary conditions
To ensure price stability, the SNB must set appropriate monetary conditions. If interest rates remain too low for an extended period, this will trigger an excess demand for goods and services. There is also a risk of inflated asset prices. Although such factors may boost the economy initially, bottlenecks occur over time and production capacity becomes stretched, causing a rise in the price level. Conversely, a high level of interest rates lowers aggregate demand. This has a dampening effect on the prices of goods and services.
Taking economic activity into account
The economy is subject to numerous domestic and foreign shocks. The resulting fluctuations in the business cycle generate pressures on prices which can be quite pronounced. Such fluctuations are unavoidable. Although monetary policy is essentially medium and long-term in nature, it can nevertheless help to limit these fluctuations.
The most common cause of inflationary or deflationary pressure is a mismatch of aggregate demand for goods and services with the economy's production capacity. Such situations can arise, for example, because of unexpected economic developments abroad or major fluctuations in exchange rates. Inflationary pressures increase when the economy is overheating, and they decrease when production capacity is not fully utilised. The SNB must gradually restore price stability by tightening monetary policy, in the first case, and easing it, in the latter. Consequently, monetary policy that is geared to price stability has a smoothing effect on aggregate demand and thus fosters steady economic growth.
The situation is more complex if price increases are triggered by shocks that increase companies' costs and cause these companies to reduce production. A sustained rise in oil prices is an example of such a shock. In such circumstances, monetary policy must, on the one hand, make sure that the higher production costs do not create an inflationary spiral. On the other hand, it must ensure that the companies affected by the increased production costs are not overburdened. A hasty restoration of price stability could have adverse effects on the economy and on employment.
The economic analyses underlying the monetary policy decisions are rendered more complex by a number of uncertainties. These uncertainties relate, in part, to the causes and likely duration of the shocks that affect economic performance. The transmission mechanisms, the time lags and the extent to which the instruments of monetary policy affect the business cycle and prices are also subject to uncertainties.
SNB Monetary Policy
How Doctors and Lawyers are bound to protech the secrecy of their Patients and Clients respectively by their Professional Code of Conduct , Swiss Bankers too are bound by this Secret Code , Protected by Swiss Banking Law made in 1934 and they followed it religiously all along.
Swiss law prevents the bank from disclosing any information regarding an account (even its existence) without the depositor's permission, except in cases where severe criminal activity is suspected.
These protections are the primary differentiator that made Swiss bank accounts so popular with banking customers around the World and it had also became one of Tax Havens of the World.
In Nutshell, The main benefits of Swiss bank accounts include low levels of financial risk and high levels of Privacy and Secrecy.
For Swiss Bankers, There are Two Entities in the World, Swiss Banks and Their Customers, i.e. Rest of the World....!!