Swiss banks tout stability and secrecy to lure rich

Wednesday, 12 October 2011 02:05 -     - {{hitsCtrl.values.hits}}

GENEVA (Reuters): Switzerland’s banking industry is relying on its stability and expertise to ensure it has a bright future as a leading centre for managing the assets of the rich, despite a concerted global attack on its tradition of secrecy.

“Swiss banking is in a transformational process. Still as Switzerland and as Swiss bankers we have a lot to offer,” Ivan Adamovich, Geneva head of the country’s oldest private bank, Wegelin, told the Reuters Wealth Management Summit.

“There was too much talk about secrecy and taxes and not enough talk about what else is there. Service quality and so on,” he said.

Strict Swiss bank secrecy, which helped the country become the world’s biggest offshore banking centre, has come under heavy fire in recent years from cash-strapped governments clamping down on tax evasion, putting client confidentiality under threat.

Switzerland has agreed to do more to help other countries hunt tax cheats, allowing UBS to hand over details of 4,500 clients to settle a U.S. tax probe and recently securing deals with UK and Germany to regularise untaxed accounts.

Despite all the pressure, it has managed to defend its leading position in the offshore business with $2.1 billion in assets, the Boston Consulting Group said in a recent report.

Although its market share has slipped to 27 percent from about 31 percent in 2003 -- with Britain and the Channel Islands, the United States, and Singapore and Hong Kong the big gainers -- bankers are looking at the glass being half full.

“The pie is growing, so everyone is gaining from it,” Yves Mirabaud, Managing Partner at Mirabaud & Cie, said.

With new potential clients emerging from growing economies in regions such as Asia and Latin America, Swiss private banks are also expanding their horizons to capture this business.

“I am not worried at all about Swiss banking, about its long term viability, growth and ability to ride through this storm,” said Louay Al-Doory, head of global business development at Swiss boutique wealth manager Reyl & Cie.

He said Swiss banks were well positioned even if clients concerned about tax issues shifted their money to Singapore.

“It would be moving from Swiss bank ‘A’ to Swiss bank ‘B’ in Singapore. What you will not find is local banks taking any of this money,” Al-Doory said.

Selling stability vs secrecy

Pierre de Weck, wealth management head at Deutsche Bank, said Switzerland had been able to make up for lost market share in Europe by growth in the booming economies of Asia, Middle East and Africa and Latin America.

“Switzerland has been replacing traditional European offshore assets based on confidentiality with emerging market assets based on lack of soundness in domestic markets,” he told the Reuters summit in Geneva.

Bankers said wealthy clients still value Swiss stability, particularly with so much turmoil elsewhere in the world.

“It has an extremely stable economy. It has a history proving that it is a safe haven for assets in combination with the strong Swiss franc,” said Peter Fanconi, head of private banking at Swiss bank Vontobel.

“The weakness of the euro zone is the strength of the Swiss market as a financial centre.”

James Fleming, head of international private banking at Coutts & Co., the private banking arm of the Royal Bank of Scotland, highlighted the same factors, but said they were also a strength of London.

Competition from other financial centres is perhaps why Swiss bankers still stress the appeal of client confidentiality even if they say tax evasion should be a thing of the past.

“Banking secrecy, in my view in times of Facebook and data all around the world, is going to be more important than before and not less important,” Adamovich said.

“If you know how much money somebody has, you also know how much you would get if you kidnap him.”