9. Global Financial Crisis, Too-Big-to-Fail Problem, and the End of Banking Secrecy (Since 2008)

Comprehensive accounts of the Global Financial Crisis can, e.g., be found in Rajan (2010) and Blinder (2013).

Figure 9.1 is compiled on the basis of the balance-sheet totals referring to the parent company rather than to the group or the holding level. This distinction matters mainly for the situation at UBS and Credit Suisse in 2007 and 2018. Accounting for the various majority stakes in other banks and financial firms would have led to even higher market shares and sizes of the balance sheet in relation to GDP.

These figures are again calculated at the level of the parent company. For the sake of simplicity and long-term data availability, Fig. 9.2 ignores the different risks of the underlying assets to calculate the capital ratio. In other words, Fig. 9.2 reports an unweighted ratio to reflect the amount of capital held within the banking sector.

The reciprocal value of the capital ratio of Fig. 9.2 would reflect the leverage ratio, e.g., how large a balance sheet has been compiled on the basis of a given amount of capital.

The leveraged expansion of the banking sector has been associated with neither an increase of Switzerland’s real GDP growth nor a decline in the interest-rate spread between mortgages and savings as a measure of the financial sector’s efficiency (Baltensperger & Kugler, 2017, pp.202ff.). Taken together, there is no evidence that the Swiss economy as a whole benefitted from the expansion of the big banks during financial globalisation.

During the same month, Credit Suisse managed to raise ten billion Swiss francs of fresh capital from private investors.

It is perhaps worth noting that the term “tax haven” has no commonly accepted definition (see e.g. Dharmapala, 2008, pp.66). Hence, the corresponding discussions remain necessarily vague and subjective (Hines & Rice, 1994, p.76; Dharmapala, 2008, pp.662). This observation also holds true for the blacklists that have been published by the OECD to identify tax havens since 1999 (see, e.g., Emmenegger, 2015, pp.156ff.). After 2009, Switzerland briefly appeared on such a list. However, politics probably plays a role in the OECD’s campaign against tax havens, insofar as only small countries and island states have ever ended up on its blacklist. Despite a comparable lack of financial transparency or international legal assistance to combat fiscal fraud, large countries, especially the United States, have hitherto never been labelled tax havens by the OECD (Emmenegger, 2014, p.159).

Landmann (2013) interprets these legal disputes as an undeclared “tax war” between Switzerland and the United States. However, virtually all alleged cases of tax evasion were resolved through outside court settlements. Because ordinary litigation and formal judgements were avoided, it remains difficult to gauge whether the US accusations against Swiss banks had any legal merit (Emmenegger & Eggenberger, 2018, p.816).

In the non-banking parts of the financial sector, Switzerland is, e.g., also an important centre for reinsurance due to the presence of Swiss Re (see James et al., 2013, Ch.20).

Another remarkable change within the private-banking segment occurred with respect to the legal organisation. Before the Global Financial Crisis, there were still banks in Geneva and other Swiss cities organised in the form of private partnerships with unlimited liability. This legal organisation was reminiscent of the family banks that used to dominate the European banking scene in the eighteenth century (see Sect. 3.​1). However, in the new regulatory and tax environment in the wake of the Global Financial Crisis, the last private banks upholding these traditions have moved to some form of limited liability company.