Switzerland: The Gnomes of Zurich

Pince-nez aquiver on his nose, the elegant banker leaned across the wood-inlaid desk in his Zurich office last week and complained: “We have been called Shylocks, gnomes, sinister manipulators —even greedy thieves. These campaigns really wound us. At times it makes one melancholy.”

Dr. Alfred Schaefer, 60, chief of the Union Bank of Switzerland, and by common consent that nation’s foremost commercial banker, was protesting the notoriety thrust upon Swiss banks by the recent troubles of Britain’s pound. Long the world’s favorite haven for nervous money, Swiss banks have amassed so much of it (fully one-fifth of their $16.6 billion in deposits comes from foreigners) that when their international clientele decided to lighten its sterling holdings, the banks became heavily though unhappily involved in the run on the pound. The Swiss themselves contributed $80 million to the $3 billion credit that stopped that run; but some disgruntled Britons still feel their economy has been-bent to the will of a clique of Swiss financiers. Labor Party leaders sneeringly called them “the gnomes of Zurich.”

Neutrality & Conservatism. Something like the fairy-tale gnomes that guarded subterranean treasures, Swiss bankers speak sparingly, avoid social ostentation, and bury their money—two floors below ground level in vaults that are built to withstand even nuclear at tack. Nearly half the deposits are in the vaults of five banks along Zurich’s Bahnhofstrasse. In addition to the Union Bank, they are the Swiss Credit Bank, the Swiss Bank Corp., and—much smaller—the Swiss Popular Bank and Leu & Co.

Switzerland boasts that it has more banks than dentists. There are, in all, 4,200 banking outlets, or one for every 1,300 people. The banks earned $295 million last year, nearly as much as the tourist industry, and attracted $568 million in foreign capital—on which the nation has long depended to offset its persistently large trade deficit.

This golden tide owes its swell chiefly to Switzerland’s reputation for neutrality, conservatism and sound currency. (Today, the Swiss franc is backed more than 100% by gold.) The Swiss have sheltered foreign possessions as well as people through the Thirty Years’ War, the Huguenot persecutions, the 1848 revolutions, and the last three major wars in Europe.

Secrets Galore. Swiss banks hold $3,000 worth of riches for each Swiss inhabitant, but their greatest treasure is the anonymous sanctuary of numbered accounts. Only two or three bank officers usually know the true identity of the depositors. The bankers also assign false names to all such depositors (obtaining a specimen signature of the alias) so that nobody can present a lucky string of numbers to a teller and walk away with a secret fortune. Any banker who violates what the law calls “his duty to observe silence or professional secrecy” faces a fine of up to $4,000 and six months in jail; so well disciplined are Swiss bankers that no case has ever reached a federal court.

The law was adopted in 1934 to thwart Nazi spies hunting German assets that had fled and were hidden abroad. Later Geneva was regarded as the financing center for both extremes in the Algerian war—the French O.A.S. and the Algerian F.L.N. Today some U.S. officials believe that the banks shield dol lars that have evaded U.S. taxes and foreign aid funds diverted by grafters in underdeveloped nations.

The Swiss will lift the secrecy veil if a depositor is accused of a serious crime, but they refuse to worry about tax dodgers. “We cannot act as a policeman for foreign governments,” argues Schaefer. He says that his bank provides numbered accounts only for people known to its officers—”not Al Capones or South American generals” —and that it turned down deposits from the Dominican Republic’s ousted Trujillo family. But he allows that “not all banks in Switzerland apply the same standards.”

Bankers in and out of Switzerland agree that relatively few depositors really have something to hide. Even so, plenty of people are willing to make quite a sacrifice either for anonymity or, more often, for the security the country offers their nest eggs. Under a law passed in 1964, the Swiss banks pay no interest on foreign deposits—and last week, in a special referendum, Swiss voters extended that law for another two years.