No, no. Ah these ones, Lindor, yeah, he'll love these. 

Swiss banks used to be like Swiss chocolates, the envy

of the industry. They were the gold standard for private

banking, but since the 1990s they've struggled. 

 This chart shows just how much things have changed.

In 1996, there were 403  banks in Switzerland. 

By 2019, 157 — well over a third — were gone. 

 So, what's going on here?

Have Swiss banks lost their shine? 

Hi Geoff. Hi Tom. 

How are you?  We're set up over here. 

I've brought you some Swiss chocolates because

I know you haven't been to Switzerland for more than a

year, and I wanted to bring a little bit of Switzerland to you. 

But in return, you've got to talk to us about Swiss banks. 

Squawk Box Europe anchor Geoff Cutmore has interviewed 

the CEO's of Switzerland's  two biggest banks for more

than 20 years. I wanted to use his experience and

insight to learn how the industry has changed. 

 Swiss banking has changed incredibly over recent decades, 

but in the last ten years, I think you

can see that shift has accelerated. 

The U.S. has been pivotal because of the

financial and economic pressure that they've been

able to bring to bear on not only the Swiss government, 

but also the Swiss banks per se. 

 Back in 2010, the U.S.  Government signed a new

jobs bill, which included a section called the 

Foreign Account Tax Compliance Act. 

 It required American citizens and businesses to reveal their

foreign assets, which would then be subject to taxes. 

To make sure they actually did this, foreign financial

institutions had to share  details of accounts held

by Americans. If they didn't,  they'd face a 30% tax on all 

payments originating  from the U.S. 

This was a problem for  Swiss banks, which had

a reputation for secrecy.  Before this, wealthy

individuals from all over the world could stash their

money into Swiss bank accounts with total anonymity. 

Traditionally, Switzerland used to be one of those places where

the banks kept your information very secret. They didn't share

information with other governments, and that

was ultimately part of the Swiss banking model which

made it incredibly successful.

Back in 1934, the Swiss government passed a

banking secrecy act that  ultimately made it an offense

for Swiss banks to reveal information about clients

to foreign governments, and that in a way sowed

the seeds of massive growth in the Swiss banking system.

Some of that history is very chequered.

The Nazis maybe hiding gold in Swiss bank vaults. African

dictators and despots that have syphoned off state funds.

That money has found its  way into the Swiss banks. 

The Swiss for their part would probably hold up

their hands and say,  “Look, you know we 

can't be responsible for where the money comes from.” 

But that answer is not good enough anymore. 

In 2007, a whistle-blower from Switzerland's largest bank 

UBS exposed to U.S.  authorities the degree

to which Swiss banks were helping American

clients sidestep  tax collectors. 

It was a revelation that the authorities in the

United States could not  ignore, and they brought

it immediately to the door of UBS and to the other

Swiss banks that had U.S.  citizens accounts that were

clearly being used for  nefarious purposes.

That resulted in years of litigation between the Swiss

banks and the U.S.  authorities which 

ultimately resulted in billions of dollars' worth 

of fines being paid out.

85 Swiss banks paid more than $5.5 billion in penalties, 

but Switzerland's two biggest banks, paid the lion's share.

UBS settled for $780 million  in 2009, while Credit Suisse

was fined a whopping $2.6 billion in 2014.

As regulators paid more attention to tax compliance,

Switzerland's share of global asset management fell from

around 9% in 2004 to  slightly above 4% in 2009.

What's more, is the Swiss government's decision to

exchange bank information with the U.S. opened the

door for EU member states  to begin their own judicial

investigations. Those  resulted in further large 

out-of-court settlements.

How did UBS and Credit Suisse manage these big

pay-outs, and what did it do to the direction

of their  business?

Ultimately, they just had to pay the fines, but the

consequences obviously has been a significant hit

to earnings and the shareholders don't 

like that and the management don't 

like that. So, where the banks have gone next is 

they've had to go out and try and find new markets,

new opportunities and as you look at the world at the

moment, there is one clear area where the opportunity

set is growing. That is in the emerging markets of Asia,

particularly where there is a growing middle class that

has savings that need to be managed.

When you exclude China from the mix, Swiss banks 

Credit Suisse, UBS and Julius Baer are among 

Asia's five biggest wealth managers.

In Asia, Singapore and Hong Kong's banking laws have

propelled their status as  offshore financial centers. 

According to the Financial Secrecy Index, they now fall 

right behind the Cayman Islands, United States

and of course, Switzerland. 

Between 2009 and 2014, at the height of the tax

compliance crackdown,  net new assets managed 

in Singapore grew by $40  billion and $285 billion in

Hong Kong. In the same period, Switzerland

experienced an outflow of $135 billion. 

The Swiss government would now say that they

are a lot more open. In fact,  more open than they have

been for decades. FINMA the regulator would probably also 

say that the focus is now very much on Switzerland 

operating a globally transparent information exchange. 

But has Switzerland really cleaned up its act?

The Panama Papers leak in 2016 revealed that 

Switzerland's two biggest banks were among the top 

ten banks using offshore accounts to

help their clients hide their wealth. 

The problem is that I think a lot of critics would say that

the Swiss have been very slow in opening up their

banking sector, that there is still too much secrecy,

that the process for getting that information is a little

too slow and a little too onerous. 

Toward the end of 2018, Switzerland began

automatically sharing client data through a tax transparency

forum under the Organisation for Economic Co-operation and

Development. However, less |than 12 months later, Swiss 

banking was embroiled in yet another scandal.

Credit Suisse's CEO was forced to resign following allegations 

that the bank had spied on a former executive.

The issue for the markets I think at this point will be

– how credible are the results of the investigation?

Things didn't get much better in 2021, following the collapse

of U.S. hedge fund Archegos  Capital Management and U.K.

finance firm  Greensill Capital. 

Credit Suisse had provided financial backing to Greensill

as it began to struggle, a  miscalculation that could

cost its clients up to $3 billion. 

The Archegos collapse cost its lenders a collective $10 billion. 

UBS says it lost $774 million from trades linked to Archegos,

but Credit Suisse  took the biggest hit.

It was forced to raise  nearly $2 billion in fresh

capital and cut bonuses  after the failure. 

Both Credit Suisse and UBS are hoping that new

management will arrest these issues. 

That money or the loss has to be borne by the shareholders

ultimately, and I think what  you've seen in the share

price performance has been a reflection of some of the

markets anger about what it's perceived to be either 

mismanagement or a misunderstanding of risk. 

So this is just about doing  good, basic banking and

unfortunately, the experience of both of these cases suggested

that there is still some improvement required. 

Okay, so at this point you might be thinking

that Swiss banking is finished, fertig, fini, finito!

Well, unsurprisingly, Swiss bankers argue that Switzerland's

differences still provide them  with advantages over their rivals. 

What ticks the box still I think for Switzerland is

you've got a very stable political system. You've got

Swiss neutrality. Switzerland is not an EU member, so you

somewhat escape that oversight from Brussels. 

When you are perceived in Europe to be the ultimate 

safe haven destination for capital, people are prepared

to take the additional costs that come with

parking money in a Swiss Franc account. 

Public perception is also positive.

In a recent international poll on the reputation and quality

of Swiss banks, they were rated by most respondents

as 'good' to 'very good.'  That's more positive than

German, British and American financial centers. 

So, has the decline in Swiss banking been overblown, or

have they lost their status as the premier banking

financial institution?  Which is it? 

To be honest, it's probably a bit of both here.

Overblown, probably. I don't think that anybody

looking at the state of the Swiss banking industry at

the moment would say that this is a sector that is in decline.

I think there's still plenty of life in the Swiss banks but what I

will say is I think that as a result of many of the scandals

that we've witnessed over the last decade and because of 

what's happened with interest rates, the Swiss bankers are

going to have to work a whole lot harder to

justify holding your cash. 

Probably shouldn't give them too much brand

presence, but they are Swiss chocolates. 

And when you go to Switzerland will you

bring me back some chocolates as well? 

Really? Okay.  That's a deal.