Switzerland is not what it used to be: the end of banking secrecy and the fall of Credit Suisse sink Zurich as a global financial center

THE Swiss numbered bank accounts For decades they kept under seven keys and in their secret codes the money that big fortunes, unscrupulous political leaders or businessmen with little love for taxes tried to hide from the tax authorities of their countries.

The power of its banking giants did the rest and transformed Zurich, of all Swiss cities, into one of the most important financial centers globally. Financial and legal stability, the credibility of the Swiss central bank and the country’s neutrality did the rest. But that Switzerland is no longer what it used to be.

In 1997, Switzerland had three major banks capable of competing in the global concert. Today he is left with only UBS after having absorbed its competitor Credit Suisse to avoid its bankruptcy and forced by the country’s authorities.

The bank that was born more than 160 years ago financing a tunnel that crossed the Alps and thus putting an end to the isolation of the country, which was left outside the European railway lines, is today a memory destined for scrapping.

Pressure from Obama

The debacle of the Swiss banking system started in 2009. That year, after the outbreak of the financial crisis with the collapse of Lehman Brothers in 2008, pressure from the European Union and above all from the US administration of Barack Obama meant that Switzerland ended its mythical banking secrecy in almost all its aspects.

The bank that had been founded by industrialist Alfred Escher was beginning to lose its foundations. It was no longer that body that had financed the industrialization of the country, it was just the one that gsecretly kept money of dubious origin and was devoted more to the financial casino than to financing the real economy.

UBS appears today as the savior, but in 2008, even the parcels of rotten assets from the subprime mortgage crisis had to be bailed out with public money because, as now with Credit Suisse, its collapse would have dragged down the entire Swiss banking sector and probably half of Europeans.

The end of banking secrecy made it impossible for Zurich, the financial capital of a small country nestled between European powers, to be one of the big global markets it had been for decades.

Switzerland is descending in forced marches towards the second division of finance but with it is also collapsing its last banking giant, impossible to bring down, that “too big to fail” that popularized the 2008 crisis.

The newspaper Neue Zürcher Zeitungpublished in Zurich, said Sunday night, after the purchase transaction, that this “made a bank of zombies disappear and gave birth to a banking monster” of a scale that Switzerland had never known. To avoid the fall of a large systemic bank, an operation is chosen that creates an entity three times its size. The last major Swiss bank.

To save

UBS extension already received 9 billion Swiss francs in state guarantees (about 10,000 million euros) for agreeing to swallow Credit Suisse for 3,000 million. The Swiss central bank also announced that it would make up to 200 billion francs available to the banking sector to guarantee its liquidity. No one expects Credit Suisse to be clean.

The show must go on because the country experiences a large part of it. Thus the Swiss president, Alain Berset, said after the operation that this is “the best way to guarantee confidence” and that it is not only good for Switzerland “but for the stability of the global financial system as a whole”. The merger creates an entity with 1.5 trillion Swiss francs in surplus, double the Swiss GDP. A monster.

Finance Minister Karin Keller-Sutter said allowing Credit Suisse to fail “would have caused irreparable economic damage”. The Swiss one was one of those considered the 30 largest banks in the world, the ones that cannot fall because they would drag down the banking system like chess pieces.

Or because its fall would abruptly put an end to Switzerland as a financial centre. If there are no more accidents along the way, the debacle will continue slowly but surely.