The Caribbean Alps?

Marketplace’s Christopher Werth files this dispatch from Davos:

There’s an interesting conversation going on in Davos over the future of Swiss banking in light of international regulation efforts. The discussion (including a panel at the Open Forum, a kind of workingman’s WEF accessible to all as opposed to the global elite), focuses on the vaunted confidentiality rules that keep account information away from investigators and ex-wives.

Niall Ferguson, a Harvard historian and economist, fears the current global clamor for regulation could be a potential boon to Swiss banks, which stand to simply sidestep the global clampdown on tax havens. “If you think back six months or so, it looked as if tax havens all over the world were essentially going to be closed down,” Ferguson told Marketplace. “And Swiss banking confidentiality was going to be one of the casualties of that process. At the moment it seems much less certain that that’s going to happen because all the politicians are focused on the domestic opinion polls and coming up with quick fixes that are going to get them off those domestic political hooks.”

As many countries struggle to accumulate capital, Swiss banks have remained a popular repository for hard currency. This, in turn, means there’s plenty of cash sloshing around in the Swiss economy. So any talk of abandoning the very thing that has led to Swiss banking dominance leads to a visceral response from many quarters.

There is some historical precedent here. During World War II, Swiss banking secrecy (along with its neutrality) made it an attractive draw for millions of wartime Dollars and Reichsmarks. And today, according to economist Paul Collier, author of “The Bottom Billion,” a large chunk of the billions in foreign aid sent to Africa has taken the scenic route into Swiss accounts as a result of corruption within many African governments.

Thus if Swiss banks manage to bob and weave away from new regulations, they could maintain their preeminence as the world’s best tax dodge. But the question Ferguson asks: “Does Switzerland really want the reputation as the Cayman Islands with snow?”

—Christopher Werth in Davos

• Jan 28, 2010 1:23 PM — Dirk Mathison
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• tags: Davos, WEF