We want to investigate whether it makes sense to have a bank account or securities account abroad. There may have been many different reasons for this, especially in the past. In the past, for example, people liked to deposit black money in a bank account abroad, because they wanted to avoid the risk that the German financial authorities would become aware of this money. However, cross-border exchange of information is now common practice between domestic authorities and foreign banks. The abolition of property tax in Germany has also made the advantage of a bank account abroad obsolete. Many more reasons why a bank account or securities deposit abroad offer hardly any advantages, we have summarized in the following article.

Many decades ago, when Swiss banking secrecy still enjoyed an untouched international reputation, many German citizens had transferred part of their assets to a bank account abroad. Swiss banks played a prominent role, but there were also other players who competed for the favor – rather the money – of foreign investors. This had become so much an epitome of alternative asset security and investment that for a long time it hardly concerned itself with the question of whether this actually made sense.

Since the purchase of the first tax CDs by German financial authorities, this view has changed. Suddenly, the supposedly impenetrable protection of the anonymity of account holders in Switzerland has turned into a shambles. No one seemed safe from the German tax offices accessing banking data abroad. It hailed self-disclosure and let untaxed money flow into German public funds. So, once again, an opportunity was missed for the objective clarification of the question of whether a bank account or securities account abroad could be useful.

Meanwhile, the situation has changed again. The times when Switzerland was able to advertise its banking secrecy are finally a thing of the past. As a matter of course, Swiss banks nowadays try to point out that they meet all EU demands for transparency. In other countries, too, this path has been started out of anonymity. The political pressure had become too great. No state in Europe wanted to be black sheep on the EU blacklist.

Even though we know that there are still many ways to do money laundering, for example – Especially here in Germany - so the question of the usefulness of a foreign bank account has remained unanswered. Therefore, let us now devote an objective consideration to it.

To approach an answer to this question, it makes sense that we first briefly look at what spoke in the past for a bank account abroad. In this way, we can review at least some of these aspects for their current relevance.

First of all, there is the most obvious reason, which certainly played a big role in the decision to open a bank account abroad. In many companies, where there was a significant cash transfer in the day-to-day business, the temptation to earn parts of the profit past the Treasury. The cash registers were still easy to manipulate, so that fraudulent black money increased. But no one could run a shadow account in Germany because there was a danger that the financial authorities could track it down. Keeping at home was not a safe option either. In any case, cash at a bank was and is best protected against criminal theft. At least you have received no interest at home for the black money. So you opened a bank account for these untaxed sums in secret abroad.

Even further back in the past, in the time of the economic miracle years, there was sometimes the fear that one’s own assets could one day be confiscated. The property tax may also have played a role here as an argument for a transfer of liquid funds to a bank account abroad. At least the question of a securities depository abroad was not important at that time.

Another aspect must also be considered: In the past, many German citizens had a bank account abroad, because this was prestigious. Without really having to reveal how much money you had in an account in Switzerland, for example, this was a sign that you had a sufficiently large fortune to afford a bank account abroad. This was quite relevant in times when saving money by bank account or savings book was still worthwhile. Sometimes a higher interest rate abroad may have waved than in Germany.

Today, the reasons cited in the past are largely obsolete. Black money may still flow or emerge from criminal activity. However, there are now far better concepts for bypassing the Treasury. In any case, a bank account abroad is no longer an all-round safe haven for such finances.

So it is clear that a bank account abroad is also no protection against taxation in Germany. Anyone who tries to avoid taxation in Germany with such a strategy risks that the tax investigation might one day become aware of the bank account abroad. Then it is also too late for a self-declaration that exempts punishment. In any case, we can only warn against tax evasion.

In addition, the hiding of liquid assets in a bank account abroad in order to avoid the property tax in this country is not a relevant reason for such a foreign account. The Federal Republic of Germany has not levied a wealth tax for many years now. Although it keeps haunting the political debate, it is currently questionable whether the wealth tax can be reactivated again. This also eliminates this reason for a bank account abroad. However, this only applies until the wealth tax in Germany becomes reality again. But even then, there are better, because legal ways to save monetary values from property tax.

Due to globalization, one is financially more liberal today than ever before since antiquity. Therefore, a bank account set up abroad for personal needs no longer makes sense. At most in the business sector, if you set up companies abroad, there may be concrete reasons for setting up bank accounts abroad through foreign legislation.

In the course of this far-reaching change in international payments, the demand for a securities deposit abroad has also practically died out. If you want to trade in securities worldwide, a securities depository established in Germany is sufficient. But more on that in a moment.

Another factor associated with maintaining a bank account or securities account abroad is costs. If you have another bank account abroad in addition to one in Germany, this also causes further ongoing costs. Often these foreign bank fees are even higher than in Germany. In this regard alone, a bank account or securities deposit abroad certainly makes no sense.

Then there is the matter of proof of the taxable interest earned on the money deposited in a bank account. In Germany, banks regularly issue certificates on the amount of interest taxed on capital gains tax. Abroad you have to request these from the banks. Then you have to submit this information in a prescribed form to the tax office. This in turn requires the processing by a tax consultant – and one who is familiar with it. All this is quite complex and rarely worth the associated effort (and costs).

A presumably often overlooked aspect concerns the deposit insurance of banks. In Germany, the money of private bank account holders is quite safe. By this we mean less the protection against bank robbers by safes or other physical as well as electronic (data) protection measures, but rather against the bank’s own insolvency. Thus, the state deposit insurance in Germany guarantees that in the event of a bank’s insolvency, the respective bank account holders will receive at least EUR 100,000.

Abroad, you are often looking for a comparable deposit insurance in vain. In Switzerland, for example, there are laws that require banks to provide insurance against such defaults, but these insurance companies are also subject to a potential risk of default.

Even if such a case, in which a bank goes into insolvency, may seem generally quite unlikely, they still occur again and again. And if you think back to the global financial crisis triggered by the downfall of Lehman Brothers Bank, it will hopefully become clear that the government measures taken at that time to bail out banks were based on a political decision. It is therefore questionable whether similar situations will cause comparable reactions in the future. In fact, there is no guarantee that even large banks, such as Credit Suisse, as systemically important institutions, will always enjoy protection against the crash.

Another consideration that some seem to be concerned about is whether financial assets in foreign bank accounts are protected from the legitimate access of third parties. If, for example, someone as managing director of a GmbH makes a mistake that leads to a claim for damages from third parties, the entire property is affected – both domestically and abroad. So a bank account or securities account abroad does not offer any real shielding protection in case of insolvency or liability cases. There are far better solutions for this, for example through a family foundation.

Similarly, the protection of assets in a bank account or securities deposit abroad can be seen when a divorce occurs between spouses. If one of the two spouses is also financially obliged to the other beyond the divorce, in any way, then the financial assets in a bank account or securities deposit abroad are generally not a secure protection against civil access.

The last point in our long list of reasons why domestic credit institutions do not have a disadvantage compared to those abroad today is directed at securities depositories. In the past, it may have been believed that a securities deposit abroad offers better returns, this is certainly not the case nowadays. This is simply due to the fact that securities trading is now just as cross-border obstacle-free as travel. This, too, is a consequence of advancing globalisation. If you want, you can now process shares and other securities worldwide at any time via a German broker and a securities deposit with a German credit institution. The dividends or capital gains remain taxable in Germany regardless of the location of the securities deposit.

In the course of researching this article, I inquired when Google noticed search queries about bank account abroad particularly often. In fact, it is hardly surprising that this is especially acute when exceptional situations occur that have the potential to affect the security or permanence of existence of at least parts of our society. This includes, for example, the period around the Bundestag election in 2021 or the time since the Russian army entered Ukraine. This observation leads to the conclusion that for some people in Germany, in addition to the many ominous advantages that a foreign bank account seems to offer, there could actually be very individual reasons to open a bank account abroad. A change of government in Germany seems to belong in any case.

However, one should be aware that the opening of a bank account abroad due to such higher-level influences basically goes hand in hand with another consequence, namely that in times of crisis one also moves one’s own center of life abroad – preferably to a neutral country. As Sweden and Finland aspire to NATO, the choice of neutral states in Europe has now shrunk to a very small number. Above all, Switzerland and Liechtenstein should be mentioned. Smaller, little-noticed alternatives are Andorra and, with compromises, San Marino, Monaco, the Channel Islands and the Isle of Man. In all these countries and jurisdictions, the financial industry is well represented. It is quite possible that a bank account in this foreign country will one day prove to be an advantage for one or the other German citizen. Since the end of World War II – even in the most threatening days of the Cuban crisis – this has never really been acute.