There is a quiet revolution happenning in traditional Swiss banks, which for seven generations catered to the very wealthy from its neoclassical buildings in Geneva’s centre. Switzerland is known for its banks, global giants-UBS and Credit Suisse. But it is the smaller, more discreet banks that are changing the most these days.
Pictet a small bank, for example, once limited its investments to stocks and bonds; heavy on the bonds, but now has $10 billion of its clients’ assets in private equity and $15 billion in hedge funds. From Geneva, Pictet and other private banks have transformed this secretive Alpine cloister of “little” neighbourhood banks into a more aggressive haven for the global elite.
Keeping secrets
For generations, Europe’s wealthy journeyed through mountains and valleys to quietly stash their money with Switzerland’s bankers, famed for taking their secrets to the grave. Now the Swiss can be found throughout the world, selling more sophisticated investment vehicles to attract high-net-worth individuals, mostly multimillionaires. They are even working with institutional clients.
This has helped Switzerland amass global banking assets under management of 6.9 trillion francs, or $5.5 trillion, in 2005, making Switzerland the third-largest asset manager in the world, after the US and UK. Switzerland also has become the third-largest commodities trading centre, after New York and London.
The Swiss have been able to ride a global explosion in asset management, fuelled by rapid growth in wealth around the world and more varied investing by both public and private pension systems.
The European Union and the Organisation for Economic Cooperation and Development have pressured Switzerland to loosen its bank secrecy. Several countries, including Italy and Belgium, have lured back untaxed assets held abroad by decreeing an amnesty for tax evasion. But that is not the biggest challenge.
As Swiss bankers penetrate markets abroad, they are facing like-minded competitors from elsewhere in the world. Dubai and Singapore have cultivated sophisticated private banking hubs, offering discreet financial services and a tax haven aimed at luring away wealthy clients. And just as the Swiss have moved overseas, foreign banks like Citibank have flocked to Switzerland. Geneva, once a sleepy lakeshore town, now has branches of 100 foreign banks. The number of foreign banks in all of Switzerland has held steady at 150 over the last 10 years, though the number of their employees has soared, to more than 18,000 today, from 14,000 or so in 1995. The total of foreign-controlled assets under management by all banks in Switzerland has risen to $2.1 trillion. In contrast, only 350 Swiss banks survive today, down from 550 a decade ago.
Source: New York Times News Service
