Swiss private bankers pledge unlimited personal liability for customer assets – a system unique in the private banking sector.
In contrast to an incorporated bank, a private bank operates as either a sole proprietorship, a collective society or a limited partnership.
Swiss private banks legally defined
In Switzerland, the German term “Privatbankier” and the French term “banquier privé” refer to a unique legal status for private bankers which has a strict code of conduct attached. Unlike regular private banks, genuine Swiss private bankers are required to pledge their full personal fortunes as collateral against loss of customer assets. They have full decision-making power.
A number of special privileges apply to private bankers, including the absence of public financial reporting requirements. But certain privileges also pose limitations, such as prohibition from publicly soliciting new money, which affects the deposit business.
Birth of Swiss private banking
The vast majority of Switzerland’s private banks were established in the eighteenth and nineteenth centuries. The establishment of new Swiss private banks waned in the twentieth century – only two new private banks were established between the years 1901 and 2000.
Bank Wegelin, Switzerland’s oldest bank (founded in 1741), ceased operations as a private bank in 2012. Rahn & Bodmer, also a private bank, is currently the oldest standing bank in the country.
Private bankers in German-speaking Switzerland
Private bankers in German-speaking Switzerland include Rahn & Bodmer (est. 1750, Zurich), E. Gutzwiller & Cie (est. 1886, Basel), Baumann & Cie (est. 1920, Basel) and Reichmuth & Co (est. 1998, Lucerne).
Private bankers in French-speaking Switzerland
There is one institute left in western Switzerland: Bordier & Cie (est. 1844, Geneva).
Swiss private banking in the wake of the financial crisis
The financial crisis of 2007-2008 and the risks brought on by the many new restrictions and tax regulations which followed it forced many Swiss private banks to restructure their operations.
Many institutions felt that private banking in the strict legal sense carried too much risk or was no longer suited to current banking needs. Lombard Odier & Cie, for example, restructured from a limited partnership to a partnership limited by shares in December, 2013.
Other Swiss banks which moved away from private banking in the strict, Swiss legal definition of the term include Landolt & Cie, Pictet, Mirabaud, Gonet & Cie (est. 1845 in Geneva), Mourgue d’Algue & Cie (est. 1869, Geneva) and the Basel-based private bank La Roche which merged with Notenstein to form the Notenstein La Roche Privatbank AG in 2015.
The Association of Swiss Private Banks connects Swiss private banking enterprises. Around 80 Swiss private banks were in operation in 1945. Only 14 private banks were still operating in 2010.
Today only 5 Swiss banking institutions still fully qualify as genuine private bankers as defined by Swiss law (as of 2019).
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