740.00112 European War 1939/10430: Telegram

The Ambassador in the United Kingdom (Winant) to the Secretary of State

2489. From Plakias18 to Russell.19 For your guidance and information in considering United States and United Kingdom action visa-à-vis Swiss banks there are submitted at the suggestion of Embassy certain impressions I have gained as to London’s thinking after initial discussions with Riefler, EWD and MEW.

London’s thinking is focussed on the short and intermediate term activities of Swiss banks which benefit Axis war effort as against long-term facilities which Swiss banks may extend to finance trade in general with Axis. So far as London is aware Swiss banks are in fact not extending long-term facilities. This approach is based on the assumption that the Swiss banks know our attitude towards long-term financial facilities granted to Axis as well as the risks involved. (Reference immediately following telegram and United Nations’ formal statement of position on Axis tainted collateral as expressed in January 5, 1943 declaration.) If effort is concentrated on short and intermediate facilities I suggest it may be possible to tie in present proposals as implementations of these formal statements. Under such circumstances London wishes to take action promptly to eliminate as soon as possible short-term banking facilities benefiting Axis war effort. So long as such action is delayed the Axis continues to benefit and with impending invasion London feels it is important to reduce to a minimum or eliminate short-term Swiss financial facilities which may implement Axis resistance.

London feels that:

Since War Trade Agreement with Switzerland would permit limited trade with enemy Swiss banks would correctly imply that we condone financial facilities in connection with this permitted traffic.
However, Swiss banks should not be permitted to infer from 1 above that we condone any and all other transactions with the enemy.
Thus far except in individual cases some of which resulted in listing action Swiss banks have not been specifically informed of the types of transactions with the enemy which are considered objectionable. They may have drawn their inferences but the interpretation of what is objectionable would depend largely on the pro-Allied or pro-Axis feeling of the bank or its desire for short-term profit with minimum of risk and would vary from institution to institution.
To impress on the Swiss banks the necessity of discontinuing financial assistance to the enemy in the short-term period prior to the armistice it would be advisable to submit quickly a statement of objectionable transactions. Such a statement could be transmitted through the Swiss Bankers Association to all concerned and it is believed that this warning would be much more effective than would be possible through approaches by Allied missions to individual banks regarding objections to financial assistance rendered to the enemy.
A list of objectionable transactions would be necessary because:
The War Trade Agreement covers only specific items, leaving a large portion of normal Swiss trade with Axis and Axis-occupied countries unaffected;
A further general warning to Swiss banks would not be effective, as they take little risk on short-term facilities;
Exemplary listing, following a further warning, may well boomerang, and newly-listed banks could then devote themselves wholly to Axis business.
At this stage of the war a substantial curtailment of assistance to the enemy might be expected by an approach of this character, provided that our list of objectionable transactions covers those items which materially assist the enemy war effort and yet permit the Swiss banks a limited field of operation to protect themselves.
In view of Switzerland’s geographic position, unless some guidance is given to the Swiss as to the nature of transactions which would cause them to be eligible for listing, the threat of listing alone would not achieve the desired results, while, on the other hand, if listing on a broad scale is resorted to, we would incur definite disadvantages, namely:
Listed banks would facilitate trade with Germany and thus place themselves entirely outside our control and
The listing of important Swiss banks would probably be detrimental to the financing of our own requirements from Switzerland.
In order to achieve the maximum, it would be to our advantage to discuss with Nussbaumer the types of transactions to which we object and, through discussion, attempt to find the most effective manner in restricting or entirely eliminating such transactions.
Consideration should also be given to the possible pressure which the Bankers’ Association may bring to bear on the Swiss authorities, both political as well as on the Swiss National Bank, in the event that the conditions imposed are too harsh and impractical to permit of a continuation of banking functions with neighboring states, even at a reduced level.

MEW’s list of objectionable transactions has been based upon a rather thorough understanding of European banking and Swiss institutions in particular, buttressed by bitter experience in the first years of the war when Swiss commercial banks, among others, anticipated an Axis victory, and extensive intercepts showing a change in the attitude of Swiss banks toward the enemy and specifically short-term transactions now being carried on which directly or indirectly assist the enemy.

The tentative list may be found to approach a statement which in effect would require Swiss banks to cease for practical purposes all business with Axis states. In further discussions with MEW in which we shall have assistance of Talbot Peterson, former Berlin manager of the Guaranty Trust, and Adams, conversant with German banking and German-Swiss clearing arrangements, an attempt will be made to eliminate those types of transactions which Swiss banks would be unable to abandon and by which damage is caused to only slight extent. This analysis would attempt to set priorities on items in the all-inclusive statement and determine those which we would not abandon and those on which we might concede or qualify.

The Embassy assumes that the reason the Department has withheld the instructions mentioned in Department’s 2032 of March 1720 was caused by consideration Embassy’s telegram 2308 of March 2120 may have necessitated. It is hoped that such instructions will be forthcoming this week and that the Treasury and FEA will advance any necessary additional types of transactions which should be included in the statement and will comment fully upon those tentatively advanced by MEW. It is felt here that if a statement acceptable to the United States and United Kingdom is submitted to the Swiss, it would be very useful to have some indication from you as to how far United States delegates may recede from such a statement. The negotiations at Lisbon will be on a give and take basis, and will require delegation of authority to the United States delegates to permit rapid negotiation of an agreed Anglo-American unilateral statement acceptable to Nussbaumer and be brought to the attention of the Swiss Government. The final draft would of course be referred urgently from Lisbon to Washington and London for approval or any essential amendment. However the subject matter lends itself to endless [Page 714] negotiations if it is necessary to refer each item back to London, Washington and Switzerland and receive counter proposals from each of these sources. As this course is not practicable, sufficient authority is requested by the Embassy for United States delegates to facilitate the conclusion of negotiations with minimum of delay when Swiss are prepared to accept agreed proposals.

There is general agreement here that once a statement is circulated to Swiss banks an infraction which warrants listing means that the listee will gain a permanent place on the list. It is also felt desirable that the statement be subject to amendment as changing conditions dictate and permit us to restrict further Swiss banking operations which assist the enemy, or as new types of objectionable transactions come to our attention. While the statement may be described primarily as an outline of objectionable transactions, it must be given to the Swiss as a fairly inclusive list, since the only advantage to the Swiss in receiving such a statement is that it gives them guidance for avoiding the lists.

Inform Treasury, EH21 and FMA.22 [Plakias.]

  1. John Plakias, American delegate to the war trade negotiations in London.
  2. Presumably Francis H. Russell, Chief, World Trade Intelligence Division of the Department of State.
  3. Not printed.
  4. Not printed.
  5. Eastern Hemisphere Division.
  6. Division of Financial and Monetary Affairs.