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Swiss banks, the Nazis and PEPs

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OK, a last and final post about Swiss bankers and then I’ll shut up.

For centuries, Switzerland has been the centre of banking in Europe.  As explained, this is due to the Knights Templar and Protestant Reformation at its heart, and is the reason that led to Voltaire (1694-1778) being quoted as saying: “If you see a Swiss banker jumping out of a window, follow him, for there is sure to be a profit in it”.

This reputation arose from the offer of interest and appreciation of the accumulation of wealth in Switzerland, which was very different to many other nations, along with their independence and secrecy.

This reputation was further enhanced and reinforced by the efforts of Alfred Escher in the 19th century who strove to connect Switzerland by rail to Germany, France and Italy, in order to make access to Switzerland simple.  From these efforts, one of Switzerland’s largest banks was born, Credit Suisse, and due to Zurich’s attraction as a final centre it was soon joined by Switzerland’s other major bank: UBS, the Union Bank of Switzerland. When UBS merged with SBC, the Swiss Bank Corporation, in 1997, Zurich became the centre of Swiss finance.

Meanwhile, throughout all this history, Switzerland benefited from wars and crisis, first in Europe and latterly around the world.

Before 1945, Europe was going through turbulent times whilst Switzerland was not.  Political conflict was virtually ceaseless in Europe from the Middle Ages until the Second World War.  European monarchs engaged in wars that needed money to be printed to finance their ambitious campaigns and wealth was threatened through loss of assets for the vanquished and hyperinflation for the victorious.

For example, between 1800 and 1945, there were 127 instances of countries falling into financial default.  Even after 1945, Europe settled down but other nations had wars causing a further 168 instances of default outside Europe and, every time assets were exposed to default, those assets flowed into Switzerland to be secured.

Even so, Swiss banking was nothing like it is today until the Second World War.

Due to the secrecy of Swiss banking figures are hard to come by but, according to the book Swiss Made, Swiss banks held about CHF19.8 billion for wealthy clients in 1945 compared to around CHF5.5 trillion today.

In fact, Swiss banks manage over a quarter of the USD$7.7 trillion of private wealth held outside its owners’ home countries, or offshore holdings if you prefer.  Swiss banks make about CHF60 billion ($67 billion) in revenues from the CHF5.5 trillion ($6.1 trillion) of wealth under management, and most of this growth is down to the efforst of the Big Three Swiss Banks – Credit Suisse, UBS and SBC – after WWII.

This growth is not without issue however.

During WWII, there were many controversies and Switzerland, as a neutral state, was pressured by both the Nazis and the Allies to co-operate.

This resulted in Switzerland's trade being blockaded by both the Allies (Britain, Russia and America +++) and by the Axis (Germany, Italy and Japan +++).

Each side openly exerted pressure on Switzerland not to trade with the other.

As a result, Switzerland’s economic cooperation and extension of credit to the Nazis varied according to the perceived likelihood of invasion, and the availability of other trading partners.

Concessions reached their zenith after a crucial rail link through Vichy France was severed in 1942, leaving Switzerland completely surrounded by the Axis. Switzerland relied on trade for half of its food and essentially all of its fuel, but controlled vital trans-alpine rail tunnels between Germany and Italy.

A key aspect during this period is that, until 1936, the Swiss franc was the only remaining major freely convertible currency in the world, and both the Allies and the Germans sold large amounts of gold to the Swiss National Bank.

Between 1940 and 1945, the German Reichsbank sold 1.3 billion francs worth of gold to Swiss Banks in exchange for Swiss francs and other foreign currency, which were used to buy strategically important raw materials like tungsten and oil from neutral countries.

Hundreds of millions of francs worth of this gold was monetary gold plundered from the central banks of occupied countries whilst some (581,000 francs worth) was gold taken from Holocaust victims in Eastern Europe.

This led to a class action lawsuit against the Swiss banks being filed in New York in the 1990s, over Jewish assets in Holocaust-era bank accounts. 

An audit of Swiss bank accounts resulted from this lawsuit, run by the Volcker Commission, which gave its report in 1999 and determined that the book value of all dormant accounts possibly belonging to victims of Nazi persecution was CHF24 million ($27 million).

In addition the commission found "no proof of systematic destruction of records of victim accounts, organized discrimination against the accounts of victims of Nazi persecution, or concerted efforts to divert the funds of victims of Nazi persecution to improper purposes."

In response to the lawsuit, the Swiss government also commissioned an independent panel of international scholars, known as the Bergier Commission, to study the relationship between Switzerland and the Nazi regime. It reached similar conclusions about the banks' conduct in its final report, and found that trade with Nazi Germany did not significantly prolong the war.

Nevertheless, Swiss banks are always associated with tax avoidance and potentially controversial figures.

For example, after WWII, Swiss private banks have served the Marcos family of the Philippines, the former Shah of Iran, Mobutu of Zaire, Duvalier of Haiti and the Montesinos of Peru.

This controversy was brought to a head by the activities of Ferdinand Marcos in the Philippines, who had hidden at least $621 million in Switzerland.

After his regime was toppled in 1986, the Philippine opposition demanded justice and, in 1997, a federal court in Lausanne ordered banks to return the Marcos’s money to the Philippines.  This ruling led to a rule, for the first time, that ‘client relationships with politically exposed person’ would be dealt with differently.

Fourteen years later, the Restitution of Illicit Assets Act, commonly known as Lex Duvalier, came into force, allowing frozen assets to be repatriated to a country more easily.

There’s plenty more I could write about Swiss banking, but I’ve probably bored the pants off most of you by now, so I’m going to leave it there.

Suffice to say that although I focus upon the future of banking, the history of banking is also fascinating. After all, without this history, there wouldn’t be a future to talk about.

Back to normal broadcasting next week.  Ta-ta.

This is the fifth in a five-part series on Swiss Banking:

  1. The Knights Templar (1300s - 1400s)
  2. The Protestant Reformation (1400s - 1600s)
  3. Medieval Independence (1600s - 1800s)
  4. Industrialisation (1800s - 1900s)
  5. The Modern World  (1900s - 2010s)


I must be honest and admit that much of this article has liberal sprinklings of extracts from Swiss Made as well as Wikipedia.  Thanks to both.


Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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