Hentsch Pessimistic on Swiss Banks Future Amid Tax Crackdown
The Swiss financial industry may face a bleak future unless bankers who traditionally relied on storing undeclared money for clients get better at investing their funds, the head of Banque Benedict Hentsch & Cie. said.
“I’m not at all optimistic about the next five years,” Benedict Hentsch, chairman of the bank, told the British-Swiss Chamber of Commerce today at a meeting in Geneva. “I don’t think we are good at asset management,” he added, referring to companies across the industry.
Hentsch, whose family members have been bankers in Geneva for seven generations, estimates that about $3 trillion of private wealth is managed by firms in Switzerland. He said about one-third of that sum is undeclared money that’s been kept secret from government tax collectors and is now at risk as the Swiss privacy advantage erodes.
Swiss banks are under pressure as crackdowns on offshore wealth centers encourage clients resident in other countries to consider repatriating funds or give up a chunk of their assets deposited abroad under new international agreements. Switzerland is in talks with the U.S. to resolve a Department of Justice tax probe of 11 financial firms, and has also signed accords with Germany, the U.K. and Austria that will oblige its banks to withhold tax from customers domiciled in those countries.
Bankers need a “wake-up call” to focus more on delivering a balance of profitability while protecting clients’ funds and keeping them invested in enough liquid assets, said Hentsch, a former president of the Swiss Private Bankers Association. Swiss firms should consider joint ventures with asset managers in other countries, hiring them to manage clients’ funds, he said.
“Swiss secrecy has helped the accumulation of wealth,” said Hentsch, who spent 10 years working in Brazil for JPMorgan Chase & Co. earlier in his career. “We are not asset managers. We are asset keepers.”
Hentsch’s concerns were echoed in a separate speech today by Nicolas Pictet, a managing partner at Pictet & Cie., Switzerland’s largest closely held bank.
“Rarely in the past has the political pressure on the Swiss financial center been as heavy as today,” Pictet told the Swiss Private Bankers Association, which he heads, in a speech at Geneva’s International Museum of the Reformation. “Once a market is lost, it may not be recoverable for a long time.”
As global money-management centers compete, Switzerland risks being left behind if it doesn’t branch out into new fields, Pictet said at the annual general meeting of the 12- member private bankers’ group,
Pictet said the industry should consider adding more institutional asset management, fund management and sophisticated depository functions, in addition to those wealth- management services now offered to individual private clients.
Challenges facing Swiss banks include “an avalanche of legislative and regulatory changes” from Europe and the U.S. and difficulties in foreign market access that could lead to the loss of 15 percent to 30 percent of jobs in private money management, he said.
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