SWISS BANKING SHAKEN BY FLOATING

Swiss banking has been severely shaken by the repercussions of the Tory government decision to float the pound.

The scope and swiftness of the moves by the Swiss authorities have spread unaccustomed shock and dissatisfaction in the banking community which dominates Swiss capitalism. Almost all sectors of banking have been affected by measures taken by the government and National Bank which have radically changed the basis of their affairs.

The Swiss authorities' aim was to prevent a huge inflow of unwanted foreign capital into Switzerland — which has long been an open haven for foreign funds in times of international monetary crisis.

The British decision to 'float' on June 23 came after a week of pressure on sterling, during which the Bank of England had to spend heavily from its reserves to keep the currency at its agreed level. The central banks of France and West Germany joined in this futile bid to support the pound. market for ten days, during which the Swiss franc in effect floated while the dollar was almost continuously below its official Zurich floor.

It then tried intervening again to support the dollar, but as dollars began to move into Switzerland the bank quickly found that this was doomed from the start. The Swiss cabinet rushed out a series of controls on foreign exchange movements and on investment of foreign capital in Switzerland — acting without consuiting the country's powerful commercial banks.

In recent years the banks have come to expect that the government would consult them in advance about new arrangements affecting their activities. These have generally taken the form of 'gentlemen's agreements'.

They were particularly upset about the ending of free capital movements, which bring them in a considerable invisible' income. The Banker's Association gave grudging support to the government's action, but demanded that the measures be made more flexible or removed altogether as soon as possible.

It described them as 'farreaching and severe' and said the government 'decreed them on its own responsibility and without taking advice from the banks'. It would be regrettable, the Association said, this dose of government control lasted too long and prejudiced Switzerland's reputation as a world financial centre.

Switzerland has long been used to upholding the free movement of international currencies, to the great profit of the country's bankers. But when the government saw fit to move, it did so in such an all-embracing manner that Switzerland overnight had more controls than many other European countries.