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The gnomes of Zurich is a term that was used by leaders of the British Labor Party in the 1960s to refer condescendingly to Swiss bankers with financial headquarters in Zurich. The phrase is meant to evoke imagery of gnomes, who in fairy tales and folklore are often greedy creatures that hoard treasure and work up secret mischief. At the time, various British politicians attributed the downfall of the Sterling, or pound, to Swiss bankers, whom they believed were speculating on the Sterling's foreign exchange rate in such a way as to cause devaluation. Swiss bankers, whether guilty or not, made an easy scapegoat: Switzerland's commitment to secret banking practices has long cast a shroud of mystery over its financial practices. Thus, the gnomes of Zurich was meant to assert that Swiss bankers were privately up to no good.
The gnomes of Zurich became a political catchphrase in the 1960s, its popularity fueled by persisting problems with the Sterling. The term's coinage is often attributed to Gordon Brown, British Economic Minister in the ‘60s, who once said, "The gnomes of Zurich are at work again." Some attribute the term, however, to Harold Wilson, the British Prime Minister from 1964-70. In either case, both politicians, among others, used the phrase to vent their frustration over the belief that Swiss bankers were tinkering with the Sterling's value and profiting from its downfall.
As the term caught on, it came to represent more than concern over the devaluation of the Sterling; it became an illustration for how the Swiss banking system works. In stories, gnomes often dwell in cavernous mountains, where they greedily store up treasures and plot impish schemes. Although they may not be diabolical nor greedy, Swiss bankers are indeed keepers of secret treasure. Switzerland is known for accepting deposits from a plentiful base of foreign investors, storing much of that money in underground, impregnable vaults. The privacy of Swiss banking accounts is fiercely guarded, so much so that it's illegal for a banker to give up the identity of an account holder.
Although some have been skeptical about Swiss banking secrecy—criminals could hypothetically use the system to store ill-gotten money—the practice came about as a means of protecting honest investors. In 1934, Switzerland enacted bank secrecy as law in order to protect German citizens who were attempting to keep their money away from the Nazi Party. Banking privacy has been a part of Swiss culture for so long that it now seems grafted into the national psyche as a given right.
With the Sterling crisis of the 1960s long past, referring to Swiss bankers as the gnomes of Zurich has lost much of its sting, if not all of it. Now, the term is used as often in Switzerland as the U.K., as a tongue-in-cheek, honorary reference to the culture of Swiss banking. In fact, the term is so accepted that the Zurich Money Museum enjoys the presence of its own resident gnome sculpture.