Chapter 8

The “Banking Secret”, the Right to Privacy,

and the Banks’ Duty to Confidentiality

Banks are obliged to maintain confidentiality about their business relationships

with customers and about their customers’ accounts. They must preserve banking
secrecy or the “banking secret” (Bankgeheimnis) as it is called in German. First
and foremost, the “banking secret” is just a subtype of the non-disclosure of facts
communicated under confidentiality, and of the general class of professional and
business secrets that are equally familiar from the medical profession, for instance,
or from brokerage activities in the case of insider knowledge discussed earlier.
Banking secrecy is the banking industry’s own brand of professional confidentiality
and trade secrecy. Any knowledge the bank comes by in the course of the busi-
ness relationship must not be used for insider gain, a principle that follows from the
fiduciary duty; nor must it be passed to others or publicly disclosed.

The Protection of Facts Communicated Under Confidentiality

Banking secrecy comprises the duty of confidentiality toward the customer and the
bank’s right to refuse information to third parties, including a country’s tax author-
ities, about its customers.1 It exists in most countries. It derives from civil contract
law and is a product of contractual freedom. It does not derive directly from the
constitutional principle of human dignity since it is not person-related but property-
related,2 although it belongs to the rights of personality that merit legal protection
to prevent infringement of personal rights or invasion of the private sphere.3 Since

1 Cf.DIETER CAHL, JOACHIM KLOS: Bankgeheimnis und Quellensteuer im Vergleich interna-

tionaler Finanzmärkte [Banking secrecy and witholding tax, comparing international finance
markets], Herne/Berlin (Neue Wirtschaftsbriefe) 1993, p. 5.
2 On the other hand, it cannot be inferred from the association of banking secrecy with personal
property and assets that it has no constitutional relevance to the protection of rights of personality,
as CAHL and KLOS (1993), pp. 5ff. assume. The objects surrounding the person are relevant to
personality.
3 Cf. F. B EUTTER : “Geheimnischarakter des Geldes und ethische Grundlagen der
Geheimhaltungspflicht”, Acta Monetaria, 2 (1978), p. 15 (own trans.): “In the measure in
which money, e.g. as remuneration for work done, has a close relation with the human person,

P. Koslowski, The Ethics of Banking, Issues in Business Ethics 30, 105

DOI 10.1007/978-94-007-0656-9_8,  C Springer Science+Business Media B.V. 2011
106 8 The “Banking Secret”, the Right to Privacy, and the Banks’ Duty to Confidentiality

the protection of a person’s rights of personality is a high constitutional priority,

and banking secrecy plays a part in protecting those personality rights that reside in
the things a person owns, it must also be accorded a value for contributing to the
protection of such rights.
Banking secrecy has force in civil law, based on the agreement between the bank
and the customer to preserve the customer’s trust and confidentiality. However, it
only has force in civil law as long as the bank in question is not obliged to disclose
information by laws of higher precedence. This generally occurs when prosecuting
authorities in a criminal trial demand information from the banks about the accused.
In this case, penal law trumps civil law. Nowadays, in view of the growing impor-
tance attached to the taxation of financial assets, the banks’ duty of disclosure in tax
investigations and tax prosecutions is becoming the main problem in relation to the
duty of secrecy and the limitations on banking secrecy.
Conflicts are flaring up, for instance, between the legal views of the German tax
authorities and the civil-law provisions on banking secrecy in Germany’s neighbor-
ing countries, including Switzerland, Austria, Luxembourg and Liechtenstein. It is
impossible to ignore the fact that, in the main, banking secrecy is most extensive
in these countries that share a border with Germany. Luxembourg’s “tight-lipped”
approach to banking secrecy surpasses even Switzerland’s. According to the former
German Minister of Finance, Peer Steinbrück, who attempted to put Switzerland
under considerable pressure in early 2009, and German finance officials, the expla-
nation for the stronger emphasis on banking secrecy in these countries can only be
the aim of diverting international finance flows to their own countries.4 Whether this
view of things is accurate needs to be examined.

Banking Secrecy, the Investigation of Tax Avoidance, Tax

Evasion, Money Laundering, and the Discussion Around
the Swiss “Banking Secret”

It is well known that banking secrecy in Switzerland is protected more insistently

and more extensively than in other industrialized countries. Therefore it is interest-
ing to discuss the problem of the “banking secret” with reference to the example of
Switzerland. The conditions under which Swiss banking secrecy can be breached are
very restrictive. Banking secrecy cannot be penetrated by tax law. This is the critical
difference from the USA and Germany: Switzerland adheres to the tenet that neither
the interest of the revenue authorities in probing the affairs of Swiss citizens nor the
interest of foreign fiscal authorities in information about their citizens’ accounts in
Swiss banks can override banking secrecy. In American law, banking secrecy enjoys

money participates in that personal sphere of legal protection. The norm governing the confiden-
tiality of banking relationships is therefore: ‘It is a fundamental ethical obligation to leave a person
undisturbed in his private and intimate sphere [. . .] Secrets should be kept.’ ” (Ibid., p. 17).
4 Cf. C AHL and K LOS (1993), p. 32.
The Swiss “Banking Secret” 107

no more than vestiges of protection. It is particularly alarming that the US Internal

Revenue Service can penetrate banking secrecy in other countries to a degree that
would once have been unacceptable between sovereign nations and, indeed, viewed
as interference in the internal affairs of another country. German banks yield in obe-
dience to the USA on this issue, with a notable haste that can only be explained by
the ever-present threat of an American boycott of the banks’ business.
The dissent between the Swiss law on banking secrecy, on the one hand, and
German and American law, on the other, is rooted in the fact that Switzerland prior-
itizes the customer’s interest in secrecy over the fiscal interest of the tax authorities,
whereas in Germany the fiscal interest is prioritized over the customer’s interest in
secrecy. However, the discrepancy in legal views between Switzerland and other
countries – it is important to emphasize – vanishes when it comes to the crucial
matter of whether banking secrecy takes pre-eminence over the interest of penal
prosecution in criminal trials. Even Swiss banking secrecy only applies up to the
point that no prosecutable offense has been detected and no criminal prosecution is
necessary.
It is best to start by mentioning the developments that make banking secrecy a
problem deserving of analysis in terms of economic ethics and business law.5 In the
first place, the internationalization of the economy is a phenomenon that undoubt-
edly makes it necessary to internationalize the investigation of tax evasion. If profits
are increasingly earned and hoarded abroad but losses from abroad are offset in the
domestic economy, the domestic tax authorities must be guaranteed a certain right of
access to the international operations of the domestic firms. This interest in interna-
tionalization and harmonization of tax laws and investigation of tax evasion is valid
in all countries, because all countries – EU Member States as well as Switzerland –
are affected by the internationalization of the economy. The European Union, the
Council of Europe, the OECD and the United Nations have therefore called for
international tax evasion to be combated.
The second development that makes banking secrecy a problem can be seen in
the increase in dirty money in the world, and the consequent attempts to turn dirty
money into clean money by means of money laundering. As far back as 1992, for
instance, the annual turnover in the global drug trade had risen to DM 800 billion
(approx. EUR 400 billion). The annual profits of crime in the heroin trade alone
were estimated at DM 1.5 billion (approx. EUR 750 million).6 The International
Monetary Fund (IMF) estimates that the money laundered worldwide amounts to
2–5% of the global economy.
Money laundering is the exchange or transfer of assets, in the knowledge that
these originate from criminal activity, for the purpose of masking their origin, and
with the intention that the perpetrators will escape the legal consequences of their
crime.7

5 On Swiss banking secrecy, cf. also PETER, RUH, HÖHN (1981), Vols. I and II.
6 C AHL and KLOS (1993), p. 72.
7 Ibid., p. 76.
108 8 The “Banking Secret”, the Right to Privacy, and the Banks’ Duty to Confidentiality

As long as money laundering was not a criminal offense, it could not be used
to justify breaching banking secrecy. But all the time that banking secrecy was
also applicable to huge sums of cash originating from the drug trade, which were
laundered by transferring them through bank accounts, it was difficult to produce
evidence of dirty money. In order to be able to override banking secrecy in the case
of money laundering, it was necessary to criminalize money laundering, since bank-
ing secrecy could only be overridden in the case of criminal offenses. Legislation
has now caught up with this requirement, which is unavoidable from the viewpoint
of both business law and economic ethics, because it was incomprehensible that
drug dealing should be criminalized but laundering of the financial proceeds should
not. That said, questions are constantly raised as to which specific disclosure and
verification duties the banks have to fulfill.
Switzerland was one of the first countries to introduce provisions against “money
laundering”.8 Since 1990, the Swiss Penal Code has included a crime of money
laundering (Geldwäscherei) according to Art. 305bis . In the case of cash transactions
over CHF 25,000, the customer’s identity must be established. In addition, screening
systems have been refined and put in place to alert the banks to funds from unex-
plained sources, which enable them to detect dirty money. Because Switzerland has
incorporated numerous penal provisions against money laundering into Swiss law,
including the partial waiving of banking secrecy in the cases of criminal prosecu-
tion, some critics now claim that Swiss banking secrecy is as riddled with holes as a
Swiss cheese. Detailed consideration of the situation lends no credence to this view.
For historically legitimate reasons, Switzerland stands resolutely by its bank-
ing secrecy. There is no ignoring the fact that Swiss banking secrecy prevented the
Nazis from accessing Jewish accounts in Switzerland. Naturally, in perpetuating
this tradition, Switzerland is also pursuing its own self-interest. With its closely co-
located banking centers of Zurich, Geneva and Basel, ultimately it is the third-largest
banking center in the world after New York and London, even ahead of Paris and
Frankfurt. In foreign currencies alone, at the end of the 1990s over 500 billion Swiss
francs were said to be deposited in Switzerland,9 while according to another source,
the Swiss banks were sitting on assets of around 3,000 billion Swiss francs.10
If we look more precisely at the conditions and situations in which Swiss banking
secrecy can be overridden, it is apparent that these conditions are very restrictive.
The first condition is that, in civil law, a mortality creates a legitimate duty of dis-
closure to the heirs. This duty of disclosure only extends to information about the
testator’s assets at the time of death, however, not to any prior account movements

8 On the problem of money laundering, cf. also NIKLAUS SCHMID: “Insiderdelikte und
Geldwäscherei – neuere und künftige Aspekte aus der Sicht der Banken”, in: W. WIEGAND (ed.):
Aktuelle Probleme im Bankrecht, Berner Tage für die juristische Praxis 1993, Bern (Stämpfli)
1994, pp. 189–215.
9 Cf. C AHL and K LOS (1993), p. 89f.
10 B. B RENNER : “Das Bankgeheimnis – abschaffen oder stärken?” [Banking secrecy – abolish or
strengthen?], Neue Zürcher Zeitung, No. 242 (18/19 October 1997), p. 9.
The Swiss “Banking Secret” 109

and developments. Switzerland does not provide mutual judicial assistance in the
field of debt enforcement and bankruptcy law.
It becomes apparent, secondly, that banking secrecy is not penetrated by tax
law either. This is the critical difference from the USA and Germany; Switzerland
adheres to the tenet that the revenue office’s interest in probing the affairs of its citi-
zens, and of course the interest of foreign fiscal authorities in obtaining information
about their citizens’ accounts in Swiss banks, do not override banking secrecy.
Thirdly, it is very much the case that criminal law overrides banking secrecy –
if not to the same extent as in the USA and Germany. Straightforward tax evasion,
either by Swiss citizens or by foreign account-holders, is not a legitimate ground for
overriding banking secrecy. Only the persistent evasion of large amounts of tax gives
Switzerland’s special tax control organs (Besondere Steuerkontrollorgane, Besko)
legitimate rights to pursue direct taxes of the Swiss Confederation.11 Swiss banks
are neither compelled nor allowed to pass information to foreign revenue offices
except in cases of serious criminal proceedings. But even for Swiss citizens, the
criminal law provides justification for overriding banking secrecy in cases of tax or
customs fraud. This offense, defined by the falsification of documentation, is a crim-
inal offense and overrides banking secrecy. To meet the criteria of tax or customs
fraud, grave deception must have taken place, involving deliberate falsification of
documents and such like.
From the viewpoint of economic ethics, the question posed is whether the Swiss
regulations coincide with the principle of material appropriateness and the idea of
justice. Critics of Swiss banking secrecy frequently claim that Switzerland’s bank-
ing secrecy aids and abets tax evasion, and that the country is guilty of complicity
in particularly serious cases of tax evasion and exploitative behavior, such as that
of the former President Mobutu of Zaire. The question is whether it is defensible in
terms of economic ethics for a country to accept that its own more extensive banking
secrecy laws make it easier for the foreign investor to evade tax in their own country,
since their revenue offices are denied access to information about the accounts they
hold in Switzerland.
The question this raises is whether Switzerland is condoning the use of Swiss
bank accounts by foreign citizens for tax evasion purposes, or whether it is merely
declaring that tax investigations launched by other countries are beyond the scope of
its powers. The first thing to say is that it would certainly look like condonement if
Switzerland were to treat tax investigations launched against foreigners differently
than those targeting Swiss residents. Analysis of Swiss law reveals, however, that
the Swiss revenue authorities cannot access the Swiss bank accounts of Swiss cit-
izens either, or at least, access is severely curtailed in comparison to Germany and
the United States, so that banking secrecy and the increased difficulty of tax inves-
tigations apply even-handedly to Swiss residents and foreigners. We must therefore
say that Swiss institutions do not encourage or promote tax evasion by foreigners
living abroad, but uphold equal treatment for Swiss and foreign residents alike.

11 C AHL and KLOS (1993), p. 94.

110 8 The “Banking Secret”, the Right to Privacy, and the Banks’ Duty to Confidentiality

A further question is whether the Swiss authorities have any ethical duty to
support tax investigations from abroad, when these are based on no more than
suspicious facts or even dragnet investigations. In this case, restraint appears to
be advisable. For one thing, Switzerland’s right to use banking secrecy in order
to attract international capital must be recognized. If capital is swayed by stricter
banking secrecy to deposit money in Switzerland, Switzerland cannot be expected
suddenly to minimize or even give up this comparative advantage by assisting tax
investigations from abroad. The Swiss institutions can rightly argue that they are not
responsible for the perhaps excessive tax rates of neighboring countries, and more-
over, that a country has no ethical duty to enforce the collection of excessive taxes
imposed by neighboring countries, or to support the recovery of such taxes.
Progressive income tax is not a natural right that every country has to respect
and implement. Tax avoidance in the context of unduly high progressive tax rates
does not contravene international private law, and need not be penalized by every
country.
For Germany, the disparity between German tax rates and those of neighboring
countries is beneficial at least to the extent that it prevents the “hungry” German
revenue authority from turning the tax screw any tighter. Nevertheless, it has unfor-
tunate consequences for distributive policy, since it enables only the wealthy classes
in Germany to reduce their tax burden by moving their capital, a form of anti-tax
protest that is not an option for the average person. This can undoubtedly be seen as
the Achilles heel of Swiss banking secrecy, and concerns are raised repeatedly by
critics based in Switzerland.
As a fundamental principle in a globalized economy, smaller countries can gain
an advantage if they introduce lower domestic tax rates, thereby attracting foreign
capital from heavily populated neighboring countries with high tax rates – espe-
cially countries whose citizens speak the same language. The loss of domestic tax
revenue resulting from the lower tax rates can be more than balanced out by the capi-
tal inflows they attract, and the resulting additional tax payments or interest earnings
from the accounts held in the banks. In the long term, this comparative advantage of
small countries can undermine the tax basis of large countries to such an extent that
they are forced to cut their tax rates substantially. This trend explains why advo-
cates of the harmonization of tax rates among EU Member States are becoming
increasingly vocal. The outcry is loudest in Germany, where high tax rates are com-
ing under pressure from several smaller German-speaking neighboring countries
simultaneously.
Tax harmonization within Europe is probably inevitable. But it is pointless to
believe this will be an upward harmonization, toward higher average tax rates. Any
harmonization will be downward, toward lower tax rates, and will probably herald
the end of the fiscal state in Europe. The pressure exerted by Switzerland on the
tax rates of EU Member States cannot be criticized, because even if Switzerland
were to raise its tax rates and water down its banking secrecy, pressure would still
come from countries like Austria, Liechtenstein and Luxembourg. Initiatives by the
German government, toward the end of 2002, to grant an amnesty for the retro-
spective reporting of investment income parked abroad and not declared for tax
The Swiss “Banking Secret” 111

purposes, point to a development in the direction of lower tax rates, which is, how-
ever, impeded by the immense increase in government borrowing due to the state
sureties needed by banks as well as economic stimulus packages in the aftermath of
the crisis in the financial markets.
The question of whether Swiss banking secrecy not only assists tax avoidance but
also connives with tax evasion takes on an entirely different nature when the issue is
not just a matter of different tax rates but the hoarding of illegally acquired, misap-
propriated or stolen property, or an instance of tax evasion that is already on official
record as part of criminal proceedings in another country. If Switzerland allowed
banking secrecy to conceal the movement of such assets into Switzerland, it would
incriminate itself in receiving stolen property. Swiss law therefore waives banking
secrecy if criminal proceedings are in hand and if the foreign revenue authority can
prove that one of its citizens who holds an account in Switzerland has committed a
serious customs or tax fraud. In such cases, Switzerland does not insist on banking
secrecy to the detriment of the international prosecution interest. So it is only logical
that in cases of tax fraud, Switzerland provides mutual administrative and judicial
assistance to foreign states.12
Swiss banking secrecy succeeds in striking a balance between the interest of
banking secrecy and that of allaying the suspicion of helping foreign account-
holders to evade taxation.
This is evident from the fact that, firstly, the Swiss banks withhold the same
data from their own fiscal authorities that they refuse to supply to foreign rev-
enue authorities. The Swiss authorities will not pass any bank data to a foreign
revenue authority that the banks are entitled to withhold from the Swiss revenue
authority.
Secondly, because of its neutrality, Switzerland does not cooperate in judicial
assistance in the investigation of offenses which it views as matters of political,
military or foreign-exchange law. There appears to be no objection in economic
ethics to this insistence on neutrality, even for offenses in tax law which arise from
political, military, or foreign-exchange offenses.
Thirdly, Switzerland does not provide mutual judicial assistance if the object of
the foreign proceedings is an act that breaches foreign tax, customs or currency
regulations or contravenes foreign trade or economic-policy provisions. Here, it is
less than clear whether the imperative of Swiss political neutrality really requires a
neutral stance toward all tax-law provisions of foreign countries. On the other hand,
nor is there any justification for waiving the imperative of neutrality on the grounds
of foreign tax, customs or currency regulations, since neither human dignity nor
overarching personality rights are affected.
The neutrality on questions of foreign tax, customs and currency law is coun-
terbalanced by Switzerland’s clear self-commitment to cooperate in mutual judicial
assistance in cases where the foreigner’s tax fraud represents an action that would
fit the same description under Swiss law. Nevertheless, in cases of tax fraud,

12 Ibid., p. 102.
112 8 The “Banking Secret”, the Right to Privacy, and the Banks’ Duty to Confidentiality

Switzerland only provides “minor judicial assistance”, i.e. it supplies documents

from Switzerland to the foreign authorities, but does not enforce a foreign claim
in Switzerland by, for instance, confiscating the foreigner’s assets and accounts in
Switzerland.13
In terms of economic ethics, the balance struck by Switzerland between neutral-
ity toward the interests of foreign revenue authorities in recovering taxes and its
clear support for foreign prosecution authorities in cases of unequivocal criminal
offenses, appears to be defensible. There is little basis for imputing to a sovereign
state any ethical duty to support another country’s revenue authority.14
A valid question, however, is whether Switzerland’s neutrality, and thus the strict
validity of banking secrecy, can be upheld in the long term in the face of inter-
national tax, customs or currency regulations. If the Swiss economy also becomes
more internationally integrated, and if the Swiss authorities themselves develop an
interest in enforcing their legal claims on the assets of Swiss citizens abroad in the
course of tax proceedings, they will not be able to avoid wider-ranging international
cooperation on issues of tax investigation and recovery. Obviously the issue here
is a weighing of conflicting interests, between Switzerland’s interest in upholding
banking secrecy and its interest in participating in international cooperation in the
field of tax investigation.
How this weighing of interests will develop is not a question of economic ethics
but one of Swiss raison d’état. As long as the benefits of neutrality on economic pol-
icy and tax law outweigh their costs, Switzerland – we may venture to predict – will
adhere to them, and put up with any disadvantages to its exports and to international
cooperation.
Should the disadvantages for Swiss industry and the Swiss revenue exceed the
benefits to Swiss financial institutions and financial markets, however, restraints on
banking secrecy will be introduced. Conflict can be anticipated on this issue between
the Swiss banks and financial institutions, on one side, and the Swiss export industry,
on the other. Which side will win is difficult to gauge, because how the relative
weight of these industries will develop is difficult to predict, and the advantages
and disadvantages that will arise on both sides are difficult to evaluate. Economic
ethics does not yield any definitive answer to this question, which is not primarily
an ethical one but a matter of economic and fiscal policy.
Swiss banking secrecy is one form of Switzerland’s fiscal neutrality toward
finance authorities abroad. Its reform or retention is, therefore, like all matters
pertaining to reform or retention of Switzerland’s traditional neutrality, a Swiss
sovereign decision that the Swiss people must arrive at by reconciling the interests
of the widely divergent Swiss stakeholders affected by this issue.

13 Ibid., p. 103.
14 In this regard, bear in mind that – contrary to the impression that may have been created by cer-
tain statements of the previously mentioned former German Minister of Finance, Peer Steinbrück, –
it is over 750 years since the factual cessation and over 360 years since the legal cessation of
Switzerland’s membership of the Holy Roman Empire of the German Nation, and more than 200
years since even that, itself, ceased to exist.
Banking Secrecy, the Right to Privacy, and the State 113

Banking Secrecy, the Right to Privacy, and the State: Thoughts

on Political Philosophy

Banking secrecy is an integral component of protection of the private sphere. It is

a principle for the avoidance of envy and resentment, which should only be waived
in very well justified cases such as genuine evidence of tax evasion. If the state
conducts dragnet investigations and seeks to breach banking secrecy on the grounds
of very slender suspicions, it is overstepping the limitations imposed on the state
and jeopardizing the necessary distinction between the private and the public sphere.
The tax law of the state, contrary to widespread views, is not pre-eminent over the
right to privacy. There is, rather, a need to examine in each particular case whether
or not the state is entitled to breach banking secrecy and the right to protection of
the private sphere. This applies even in the present situation where sensitivities are
heightened by international terrorism and its international finance operations.
The protection of the private sphere, including banking secrecy, is aligned with
what is, in Western Europe, a deeply-rooted distinction between private and public,
which is a constant in the European history of ideas. The protection of banking
secrecy is a less momentous issue for the USA, a country not scarred to the same
degree as Europe by a history of authoritarian state interference in the private sphere.

The Dualism of Private and Public, of Society and State

The right to privacy operates not by the state conceding us the right to privacy, but
by the society of citizens granting the state rights of intervention, such as tax law,
in well-defined legal situations. The right to property ranks above the tax law of the
state, because tax is taken from the citizen’s lawfully acquired income and property.
Based on property law, banking secrecy is also protected from state intrusion. Only
in the face of compelling suspicions can banking secrecy be waived.
To return to Aristotle’s political philosophy, he makes the distinction between
the sphere of the political and public, the polis or city, and the sphere of the eco-
nomic and private, the oikos or household. He criticizes Plato’s theory developed
in his book Politeia, The State, which required the elimination of this distinction.
As we know, Plato was a proponent of the thesis that in the ideal state, the politeia,
there must be no distinction between private and public, oikonomia and politeia.
For the community, according to Plato, what matters most is that everything affects
everybody in the same way, without favor or distinction. If there is a private sphere,
however, some people will be more affected by whatever befalls the state than others
who can retreat into their private sphere.
This is one of the constantly recurring arguments against the right to privacy.
The upshot of privacy is that not everything political has exactly the same repercus-
sions for everyone. The right to privacy creates a private zone of protection and a
differentiation from the public arena. This right, by its very nature, is not equal in
its manifestation. Somebody who has a larger plot or apartment has a larger zone
114 8 The “Banking Secret”, the Right to Privacy, and the Banks’ Duty to Confidentiality

of privacy than somebody else whose private space is smaller. It is always the asso-
ciation of privacy with inequality that provokes resentment against the principle
of privacy, and the arguments against privacy are often similar to those against
inequality.
The argument for privacy is the counterargument to the Platonic argument for
the necessity of the equal bearing of adversity by all: the community has an inter-
est in ensuring that, in times of political error or aberration, not everybody should
be equally affected by adversity in the public sphere. The private sphere is a safe-
guard against the totalism of wrongdoing perpetrated by politics. Naturally this also
implies that the good public sphere is prevented by the same mechanism from exert-
ing a good effect on the totality of the social world, because a private sphere can
then assert itself beyond the confines of the public sphere.
Banking secrecy in Switzerland undoubtedly made it possible to prevent the
Nazis from accessing Swiss bank accounts belonging to Jews. The Nazis’ attack on
private law in general, and the dereliction of any protection in private law for Jewish
citizens, made way for totalitarian ideology and practices to pervade all spheres of
German life during the Nazi period.
The protection of privacy is therefore akin to a technique for risk minimization,
to counter the total intrusion of the state, and thus to mitigate its political, legal and
cultural mistakes. Perhaps the right to privacy and the insistence on the distinction
between the private sphere and the public sphere mean that the optimal state is never
realized, because the citizens reserve the right to privacy, but at the same time, they
prevent the worst outcome, namely the insinuation of the bad public sphere into all
realms of society – totalism of the bad public sphere. The differentiation between
private and public is necessary because the risk of the worst is always to be avoided,
and because it is not always possible to realize the best. The imperative of halting
totalism in the political sphere follows from the principle of law and from the ethic
that we always have the duty to avoid wrongdoing but that we do not have the duty
to induce the optimal by coercive means.
The imperative of upholding the distinction between private and public is a kind
of negative utilitarianism. The prime concern is not to realize the monism and max-
imal utility of the optimal public sphere, but to avoid the negative utility or harm
done by totalism of the bad public sphere. This imperative follows from the frailty
of human nature and the ever-present danger that this frailty will be potentiated and
totalistically propagated by collective political action.
Aristotle himself states the crucial objections to be raised against the non-
differentiation of private and public in his criticism of Plato’s theory of communal
property without any distinction between private and public, oikos and polis: his
argument against Plato is that communal property is not really property, and that
individuals will no longer care for things if there is no distinction between the public
and the particular. He further criticizes that, by following Plato’s political philoso-
phy, the principle of the mixed constitution and of the separation of the power of
several constitutional principles, as well as the principle of distinguishing between
public and private, cannot be realized. In the state with communal property and
Banking Secrecy, the Right to Privacy, and the State 115

elimination of the private sphere, there is no distinction between public and private
and no safeguard against political power.15
It seems as though Plato accepted some of these points of criticism. In the retrac-
tion of his political philosophy in his Laws, he gives up the idea of communal
property and of the elimination of the difference between polis and oikos.
Christianity in its infancy tended to heighten the distinction between private and
public into the distinction between the public sphere and the sphere of religious
inwardness. Latin Christianity’s differentiation of state and church did its utmost to
separate the sphere of politics from that of religion, and to distinguish the sphere
of the private and of religious inwardness from the sphere of the public, including
public religion.
Michael Oakshott has shown that civil society is a sphere in its own right, which
is not constituted by the state. It is a sphere in which people pursue their own ends,
whatever these may be, without being under any obligation – and free to reject any
obligation – to pursue collective ends.

Protection of the Distinction Between Private and Public

as a Consequence of Skepticism About Humans
as Political Beings
The differentiation of public and private is a constant that is closely associated with
Western skepticism about human nature, particularly toward man as a zoon poli-
tikon, a political animal. Associations with the theory of original sin spring to mind
here. If even the individual is constantly tempted to do wrong, and often does wrong,
how much more is that to be feared from people united in collective action? The
demand for the differentiation of public and private arises from the insight that the
collective potentiates badness, if the majority or a strong minority desires what is
evil or bad. This badness can range from a trivial malaise like simple envy, through
raging jealousy, to full-scale criminalization of the public sphere through forms of
enslavement and genocide. The power of the unified forces of the state and the pri-
vate sphere can tip over into evil, and magnify and potentiate it to far beyond the
capacity of the individual act of evil. A tiny modification of the content of the word
“good”, if it is adopted publicly and universally, can tilt the public sphere into the
realm of evil.
A key example is envy. Envy is the essential reason for protecting the private
sphere. Envy is also the central argument for banking secrecy and the strictures of
confidentiality in financial affairs. The impacts of envy and jealousy go far beyond
those of individual envy if they are combined with political power and take on the
shape of political resentment against individuals, groups or nations.

15 Cf. PETER KOSLOWSKI: Zum Verhältnis von Polis und Oikos bei Aristoteles. Politik und
Ökonomie bei Aristoteles 1976, 3rd edn. under the title Politik und Ökonomie bei Aristoteles
[Politics and economics in Aristotle], Tübingen (Mohr Siebeck) 1993, and KOSLOWSKI (1982).
116 8 The “Banking Secret”, the Right to Privacy, and the Banks’ Duty to Confidentiality

Barriers to information about the private sphere and barriers to undue trans-
parency are often the best way to nip resentment in the bud. These are strategies
for resentment-avoidance. Precisely when resentment and envy threaten to domi-
nate entire groups and goad them into hostility toward minorities or members of
other nationalities, defending the groups that come under attack from unjustified
exposure to transparency and protecting their private sphere is the only way of con-
taining and controlling resentment and envy. This control of envy is another of the
functions of banking secrecy.