A Swiss bank account - symbol of security and secrecy for many of the moneyed people around the world - may be a little less attractive these days in the wake of a major scandal involving Switzerland's oldest and third largest bank, Credit Suisse.
Through shady dealings by its branch at Chiasso on the Italian border of which the bank's Zurich headquarters supposedly was unaware, Credit Suisse faces losses that state prosecutors estimate could run to $400 million.
That would make the loss the largest in Swiss banking history and among the largest suffered by banks anywhere.
In terms of Switzerland's proud and preponderantly solid international banking industry, the projected losses do not create a fatal financial ripple. And Credit Suisse has huge hidden reserves to cover the loss, which it claims will be somewhat less than the projections when the final auditing is done.
Nevertheless, this particular scandal has cast the most serious and troubling shadow ever over the very things that traditionally have made the strange and secret world of Swiss banking attractive to so many people.
Indeed, the passion of the Swiss and their customers for secrecy seems to be the thing that tripped them up in a case that has all the elements of a Hollywood script.
In an operation that apparently has been going on for several years but was only publicly disclosed by the bank on April 14, more than $800 million in Italian lire had been transported illegally out of Italy by wealthy residents who were trying to hide the money, beat the taxes or protect their capital against a Communist takeover.
The funds were deposited in the Credit Suisse branch at Chiasso, a picturesque Swiss village "within suitcase-carrying distance" of the Italian border.
There, branch manager Ernst Kuhrmeier and two deputies allegedly put the funds into trust accounts that were not recorded on the bank's official books. They then allegedly funneled them, along with loan guarantees, to a front operation - nothing more than a mailing address - in the tiny principality of Liechtenstein.
Leichtenstein, a country of about 60 square miles, is probably the one nation more secretive about bank and legal affairs than the Switzerland. It is best known as the place that shelters more companies per square mile than any other in the world.
In the midst of the Chiasso disclosure, a much smaller private bank here - LeClerc and Co. - was ordered closed by the bank commission after heavy real estate losses were uncovered. Sooner after, two of the firm's officials, including the recently retired bank manager, were found dead - apparent suicides.
Although the LeClerc episode has no direct connection with the Credit Suisse affair, the timing has added both drama and uneasiness to financial circles already shaken badly by the larger bank's troubles.
It is also cited as symptomatic of a greater malady by those who caution that the Credit Suisse affair should not be viewed merely as an isolated breach of traditional Swiss honesty, discretion and prudence in handling other people's money.
Critics within the financial community point out that in the last 7 years 28 banks have had to close in this country. Even the bankers admit the figure is "very high" in a country roughly the size and population of Pennsylvania, but with more than 500 banks and some 5,000 banking offices, about 1 for each 1,000 inhabitants.
Two of the private banks that folded within the past year - Bankag of Zurich and Banque Exel of Geneva - were small, but rated among the safest because of their high liquidity.
Similarly, the Chiasso area itself and the larger adjoining city of Lugano, both near the Italian border and both overflowing with banks, repeatedly have been the scene of bank misdeeds.
Earlier this year, the Weisscredit Trade and Investment Bank in that area was shut down in a case that also reportedly involved a Liechtenstein connection. The Union Bank of Switzerland's Chiasso branch also ran into trouble there in 1973. The following year, the branch of Lloyds Bank of London was hit by a foreign exchange scandal and much heavier losses.
The Swiss traditionally have pointed to foreign banks and foreign interests as the cause of whatever troubles occasionally pop up. But the fact that the Chiasso affair involves not only a Swiss bank, but one of the biggest and best, is what privately is said to be most unnerving.
The case still is unfolding and several key questions which remain unanswered could raise or lower the anxiety among bankers and customers about the Swiss system.
Thus far, the branch manager and his deputies are under arrest and other criminal proceedings have been started against three Chiasso lawyers who reportedly acted as front men for the Liechtenstein connection, a holding company known as Texon-Finanzanstalt.
It was through this company that money and loan guarantees in the name of Credit Suisse were funneled for reinvestment in an assortment of Italian ventures.
Eventually, those investments were sour. This, in combination with an Italian government amnesty for lire smugglers that produced a run on the branch's assests, is believed to have led to the severe financial strain on the branch that eventually was uncovered by the home office.
Three of the top officers of the headquarters in Zurich have resigned, although a company statement says their honor and integrity is not in question.
The state prosecutor in Chiasso has sharply criticized Credit Suisse management for laxity in allowing the shady dealings to go on. The prosecutor has charged that the Zurich headquarters failed to heed warnings from other banks issued as long as seven years ago that suspicious transactions were being carried out in Chiasso and neglected to follow up its own orders to the branch to clean things up.
Did the top bank management in fact know what was going on? Far graver repercussions will be felt by the Swiss banking community if the answer is yes.
Who owns Texon-Finanzanstalt? There have been rumors of underworld connections.
Why didn't the bank's own auditors catch the fraud at Chiasso long ago?
One answer offered by a Geneva banker is that a "gentlemen's agreement" among the big commercial banks usually covers any unusual dealings. Swiss bank reserves are so huge that no depositer is likely to ever lose money, even though there is no deposit insurance here as in the U.S. But another financial expert pointed out that the biggest bank auditing firm here is Fides Company, which is an affiliate of Credit Suisse.
The scandal also highlighted another aspect of Swiss banking - the extent of hidden reserves. In the aftermath of the Credit Suisse disclosure, the Swiss National Bank and the two largest commercial banks offered to lend the troubled bank $1.2 billion in reserves to cover the losses and maintain public confidence.
Credit Suisse rejected the offer, which means it has more than enough reserves to cover. Bankers believe the hidden reserves are substantially greater than what Credit Suisse has revealed publicly.
There have been heated debates in the press and parliament here calling for stricter controls. But no real challenge to the secrecy codes - which Swiss citizens also enjoy - has been raised. Whether reformists will make headway against an entrenched banking industry remains an open question.
Within banking circles, the predominant view is that the present crisis will blow over in six months or a year. Most expect that full confidence will be restored with the introduction of tighter regulations and better auditing procedures. The bank's image may even be improved, they say, by its proven ability to make good on losses.
The ones who may be hurt the most could be the small private banks and those willing to take the risks associated with dealing with "black money," or Mafia money.
The fact is, as critics point out, that nobody outside really knows where the huge amounts of capital that flow in and out of here originate.Some undoubtedly is from politicians and businessmen in countries where the future looks shaky - so-called "worthy" or "flight capital." Some is from tax avoiders or evaders, some from criminal proceedings - "black" or "hot money" - while other funds come from currency speculators, and people who simply want privacy.
Public statistics show that $70 to $100 billion of deposits and trust funds administered by Swiss banks come from abroad.
Swiss bank public balance sheets add up to more than double the country's gross national product.
Some critics believe that the Credit Suisse woes reflect the uncontrollability of the foreign money flow. Massive fresh deposits have been made here in recent years by sources in Southeast Asia, Africa and South America, dwarfing the ability of the Swiss to manage all of it well. In some cases, instructions reportedly accompany shady money, directing it into suspicious reinvestments.
Nevertheless, the main reason most bankers feel the Swiss won't be hurt for long over the Credit Suisse affair is because there is no other place for most Swiss depositors to go.
There are a few other places with bank secrecy laws - where virtually nobody, including governments, has a right to find out the details of any account. But there is no other place that offers secrecy as well as the security that comes with a stable political society and the world's strongest currency. Nor is there another place with such a deep-seated cultural neutrality that feeds the dedication to privacy that has withstood the test of everything from Nazi efforts to uncover hidden funds to modern investigators' attempts to locate the Lockheed payoff cash.
"Credit Suisse is indeed a major pillar of the industry," one banker here said. "And it did shake. But it's so strong, I'm sure it won't crumble."