Home' Trinidad and Tobago Guardian : April 3rd 2014 Contents APRIL 2014 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
THE ECONOMIST | BG27
Like their country s watchmakers, Swiss banks
have enjoyed a reputation for quality, reliability and
watertight discretion. Since 2008, however, spectacular
coups by neighboring countries tax authorities and
investigations by America s Department of Justice
have torn at their reputation. Now they are trying
to rebuild one as squeaky-clean money managers.
The deceptive calm of shoppers on the Bahnhof-
strasse in Zurich belies the turmoil behind the doors
of nearby financial institutions. Foreign banks are
selling out. The biggest Swiss names are dogged by
litigation and calls for more capital even as costs are
rising and margins falling. On March 13 they lost a
prominent client when Uli Hoeness, president of
Bayern Munich soccer club, was jailed for three-and-
a-half years by a Munich court for avoiding tax on
money in a Swiss bank account.
It is now clear to even the most obstinate Swiss
banker that he must change his game or face ruin.
Four of the classic Swiss private banks, La Roche,
Lombard Odier, Mirabaud and Pictet, have opted for
limited liability, ending the owners total responsibility
for the core bank; mainly because of the risk these
days of picking the wrong clients. That leaves a
shrinking number of private banks in Geneva, those
of the sort whose offerings go beyond providing
financial advice into something more akin to a lifestyle
concierge service. Some surely are too small to sur-
Swiss bank secrecy is no longer a protection.
Between them the Organization for Economic Coop-
eration and Development and the European Union
are insisting on a voluntary exchange of information
that makes banks declare each account automatically
to the relevant tax authority. America has dished out
hefty fines, too, and forced lenders to hand over
names, a once-unthinkable breach of client trust.
To make things worse, in February a referendum
calling for quotas on immigration was narrowly
approved by Swiss voters, clouding negotiations on
Switzerland s continued access to EU markets. Swiss
banks, though rapidly expanding their client base in
Asia, still rely on Europe for around 35 per cent of
their foreign client money. In an effort to keep up
with EU regulation, a new draft Swiss financial-ser-
vices law outlaws commissions linked to the sale of
financial products. That is a severe blow to bankers
and financial advisers who have lived off incentives
to sell certain products and the churning of unwary
Amid this turmoil, new patterns are emerging, and
with them hopes of salvation. Size and reach matter
more than ever. UBS and Credit Suisse, the big two,
together added $108 billion to their private-banking
assets in 2013. Bank Julius Bar, the fourth-biggest,
has gambled on Asia, buying the non-American oper-
ations of Merrill Lynch in 2012. Now Asia accounts
for a quarter of its assets under management.
More broadly, Zurich hopes to reinvent itself as a
handler of money for institutions rather than indi-
viduals. Such asset management is more transparent
than private banking and less prone to attracting
dubious clients. Some banks are ahead of the curve.
Vontobel is as much an asset manager as a private
bank, with two-thirds of its business institutional.
Raiffeisenbank started buying asset-management
boutiques last year to diversify from its local mort-
gage-lending business. The core of the new operation,
Notenstein, was the non-American business of
Wegelin, which closed down after running afoul of
American regulators in 2012.
Unless a private banker or asset manager stays
very Swiss and very small, he will need access to
clients in the E.U. It looks increasingly as though
that will mean having a presence in Germany or Lon-
don. Bar and Vontobel have licensed banks in Ger-
many, while Lombard Odier and Pictet have big oper-
ations in London. Credit Suisse, rather
counter-intuitively, recently sold its private bank in
Germany and a chunk of its asset-management oper-
ations. Many wonder if its high-rolling investment
bank wouldn t have been a more suitable unit to put
up for sale.
Boris Collardi, chief executive of Julius Bar, sees
virtue in what he calls "pure play" private banking.
Bar spun off its asset-management division in 2009.
He reckons that the Swiss are still recognised as the
best in the world at private banking, in terms of
service and knowledge of tax laws in many jurisdic-
Zeno Staub, his counterpart at Vontobel, sees
service and performance as two pillars of private
banking, with stability or Swissness as the third --
but no longer the primary one.
"Swissness is only an add-on," Staub says. "It s
not the key any more."
@2014 The Economist Newspaper Ltd. Distributed by
the New York Times Syndicate
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