Swiss banks that aren’t dependent on the country’s crumbling financial secrecy laws may find international expansion easier than those that sold hidden accounts in the past, according to Switzerland’s financial supervisor.
“The shift away from businesses which rely on some elements of banking secrecy is changing the perception” of Swiss wealth managers abroad, Mark Branson, chief executive of Finma, said on a panel at an event in Bern, Switzerland, hosted by the Swiss Bankers Association on Monday evening. “Many of our banks have a strong interest in international activity.”
Switzerland has tried to shake off its reputation as the world’s largest tax haven by cooperating with other governments trying to recoup undeclared assets. The government says it plans to share foreign clients’ account data with other countries by 2018 as part of a new system designed by the Organization for Economic Cooperation and Development.
For clients from countries that aren’t covered by automatic exchange-of-information agreements, banks will need to conduct risk-based checks, the government said last Friday in a message to parliament. Lawmakers were asked to stiffen the current anti-money-laundering law.
With the loss of secrecy undermining the offshore market in Switzerland, many private banks have tried to follow UBS Group AG and Credit Suisse Group AG, the country’s two biggest lenders, in building their presence in other financial centers such as London, Hong Kong and Singapore, to tap private wealth and win mandates from institutional investors such as pension funds.
Julius Baer Group Ltd., the third-largest Swiss wealth manager, doubled assets managed in Asia after acquiring Merrill Lynch’s non-U.S. businesses from Bank of America Corp. in 2012 and has ambitions to expand in London. Lombard Odier, Geneva’s oldest bank, has offices in Singapore and Hong Kong and said last year it planned to increase managed assets in Asia by 20 percent a year.
Union Bancaire Privee, which finished 2014 with almost 100 billion Swiss francs ($108 billion) under management, agreed in March to acquire Royal Bank of Scotland Group Plc’s Coutts International business. Geneva-based UBP, which purchased international private banking operations from the U.K.’s Lloyds Banking Group Plc in 2013, expects the Coutts deal to bolster its business in the Middle East and Singapore and needs a license approval from authorities in Hong Kong.
Branson, a former banker at UBS who has led Switzerland’s Financial Market Supervisory Authority since April 2014, said the quality of home-market regulation reflects well on Swiss financial companies seeking to expand abroad.
“What other regulators think about how well our financial center is run, regulated and supervised is one of the critical factors in the competitiveness of our financial center and I think it’s something that is often underestimated,” he said, speaking on a panel alongside UBS Chairman Axel Weber, who was formerly head of Germany’s Bundesbank, the country’s central bank, and a member of the European Central Bank’s Governing Council.
Switzerland, with two of the world’s top 10 financial centers in Zurich and Geneva, makes a significant contribution to international regulatory discussions and benefits from having a well-regarded domestic financial regulator, according to Weber. The Swiss government can also help the financial industry by ensuring better cross-border access to foreign markets, including in European Union countries, he said.
“If you cannot do domestic business and international business and use both of those pillars jointly to reinvigorate the model, it gets a lot harder in the future,” Weber said.