Annex I: Anti-Money Laundering Issues
See Swiss Bankers Association, The Swiss Banking Sector (Basel: September 2001).
By end-2001, the number of banks operating in Switzerland was 377. The state-owned Swiss Post Office is also a provider of payments services, with a payment system that parallels that of banks. It accepts customer deposits but is not allowed to extend loans.
“Europeans Infiltrate the Ranks of the World’s Biggest Banks,” Euromoney, June 2001.
The remaining banks have a combined share of 3 percent of Swiss banking assets.
Securities dealers include not only market makers and client dealers (who trade securities in their own name for the account of clients), but also issuing houses and own-account dealers.
According to data from the Swiss Funds Association (SFA).
As of November 2001, 2,749 funds (42 of which hedge funds) were registered and approved in Switzerland, more than 80 percent of which were foreign funds.
Outstanding repos amount to about SwF 35 billion, two thirds of which involve the SNB. The Swiss unsecured market volume is about SwF 45 billion.
This includes issues of the federal government, the cantons, and the municipalities.
External auditors enjoy legal protection from personal liability when performing duties at the direction of the SFBC. Only the Swiss state can be held liable, and can have recourse against the special auditor if the latter acted with gross negligence or intent.
The SFBC recently created a team responsible for supervising bank auditors.
The SFBC has two to three trilateral meetings a year with the New York Federal Reserve and the U.K. FSA. Similar arrangements are being set up with other supervisory authorities.
This includes fit-and-proper tests for managers but excludes other prudential regulations.
See also Chapter IV on stress testing for an assessment of the relevance of the macro vulnerabilities and potential imbalances identified in this section for bank soundness.
International intermediation in Switzerland is high in the sense that (i) foreign liabilities are high relative to foreign assets (excluding foreign exchange reserves), and (ii) the amounts intermediated are large in percent of GDP. The respective measures were 81 percent and 421 percent at end-2000 (SNB, Monthly Statistical Bulletin, Table M3).
The staffs stress testing exercise did not evaluate off-balance sheet positions. These, however, are regularly monitored by banks and supervisors.
For example, both groups have to file Form 20-F with the U.S. SEC, and present consolidated balance sheet and income statements based on U.S. GAAP.
At end-2000, UBS, the largest asset manager in the world, and CSG had assets under management of SwF 2.5 trillion and SwF 1.4 trillion, respectively.
Cantonal banks’ customer deposits cover about 40 percent of loans, down from 47 percent in 1997. Mortgage and other bonds have covered on average 32 percent of credit. Net interbank borrowing covered over 5 percent of credit, up from net interbank lending in 1997.
The SNB and SFBC have launched a project to monitor the interbank market more closely.
Privatization proposals put forward in recent years have been rejected by the electorate.
The Swiss professional secrecy requirements are based on the concept of confidentiality in contractual relations and privacy protection rules (Article 47 of the Federal Law on Banks and Savings Banks and Article 43 of the Federal Law on Stock Exchanges and Trading in Securities). Violations of professional secrecy are sanctioned by imprisonment or fine. However, professional secrecy does not apply if information must be provided to the authorities and courts as specified by law, such as in the case of anti-money laundering.
The SFBC is already in the process of collecting these data in a more systematic way.
The Federal Office of Statistics, with the assistance of the FOSI, collects pension statistics every two years, and publishes them with a two-year delay; the last year available is 2000.
Cases of insolvency by pension foundations have been rare, but are usually more significant in terms of outlays by the Guarantee Fund.
The Swiss bank’s clearing bank in New York suffered damage during the attacks.
The SNB had such an arrangement until it was terminated three years ago.
Legal arrangements allowing these firms to accept deposits are currently being reviewed.
The SFBC released in 2000 a report on the “Abacha Funds at Swiss Banks,” which investigates adherence of 19 banks in Switzerland to AML requirements.
The SFBC recently created a dedicated team responsible for supervising bank auditors.
Securities dealers include not only market makers and client dealers (who trade in their own name for the account of clients), but also issuing houses and own account dealers.
As of November 2001, more than 80 percent of funds registered in Switzerland were foreign. Swiss fund providers account for 30 percent of the fund market in Luxembourg.
In April 2002 the General Meeting of the SWX Swiss Exchange decided to convert the Association into a joint-stock company named SWX Swiss Exchange. All the members of the former Association have joined a new association (Association SWX Swiss Exchange) that took over the shares of the SWX Swiss Exchange.
The EU Directive on UCITS (85/611/EC) has recently been amended by Council Directives 2001/107/EC and 2001/108/EC of January 21, 2002. These changes are not reflected in current Swiss legislation.