The Impact of the OECD Standard on the Swiss Banking Industry Dissertation

The Impact of the OECD Standard on the Swiss Banking Industry - Dissertation Example The developments were of strong influence in the actual economy and as the year 2008 came to an end the whole economy had gone through the ensuing crisis (Gugler & Siebert, 2007). Despite the fact that, the Banking industry was one of the most regulated industries within the country, the ongoing financial crisis could not be curbed. More often than not, the financial crisis uncovered different imperfections in international regulation. Before this crisis, the whole banking system had been assumed to be secured for as long as each unique bank satisfied the requirements in terms of capital reserves (Brissimis & Papanikolaou, 2008). This enabled it to absorb the upcoming negative economical developments. In many cases, one theory explains that it is sufficient in supervising the banks at a micro-level, and this supervision would prevent a crisis within the entire banking system namely at the macro level. This theory holds in a non-globalized or less globalized world (Brissimis & Papanik olaou, 2008). Consequently, the current globalised world quest for new requirements for the banking sector. The recent developments in the current financial crisis emphasize the need for international regulations within the banking sector. The financial crisis made the affected banks appear to act unfavorable making an adverse impact on the refinancing mechanism with other financial institutions. This meant that, during the crisis, banks were forced to increase their capital requirements so as to prevent their defaults and as well to fulfill the new capital requirements (Gugler & Siebert, 2007). As a consequence, the banks were forced to reduce their lending to other financial institutions. The shortage in interbank lending brought about a liquidity crisis within the whole financial sector. In this respect, it was extremely vital to coordinate new international regulations at a national and international level in order to strengthen the domestic and the international financial syste m( Gugler & Siebert, 2007). Additionally, the financial crisis made the public debt increase. Many governments were forced to bail out system relevant financial institutions (De Bandt & Davis, 2000). Different governments spend out a considerable amount of money to stimulate their economies. This forced many governments to reduce their governmental spending and at the same time generate new revenues (Molyneux & Thornton, 2004). Having the requirement of raising new funds, many governments including the US and EU, promoted the repatriation of cross border assets. Switzerland is one of the world leading financial centers in terms of offshore and international banking (Tyndale, 2009). As a consequence, the Swiss banking sector was targeted by these economies. Besides the financial interest of the EU and US, it is also vital to consider the legal aspect of tax management by Switzerland. It is also crucial that Switzerland was the main target as a tax haven by the EU and US (Iwata, 2004) . The Swiss law has in many instances made a distinction between Tax fraud and Tax evasion. Tax fraud has always been a crime in Switzerland. In contrast, tax evasion is not a crime in Switzerland. Specifically, the latter assist in explaining why the EU and the US put pressure on more transparency of the Swiss tax management (Jimenez, & Saurina, 2007). However, the EU and Switzerland pursued the interest of harmonizing their tax management. The loosening of the banking secrecy made the attractiveness of the Swiss banking