Offshore
Private Banks Must Adapt To Squeeze On Offshore Centres - PwC
International private banks must expect that onshore financial centres will acquire a bigger chunk of client money at the expense of embattled offshore centres, PricewaterhouseCoopers said in its report on the wealth management sector.
The era of absolute banking secrecy is coming to an end and is being replaced by what PwC calls a world of “compliant confidentiality”, which means private banks will have to re-think the value of their services that are provided in international financial centres.
Earlier this year, the Group of 20 major industrialised nations agreed to put pressure on so-called tax havens to co-operate on providing information to help root out alleged tax dodgers. The process of putting pressure on these offshore centres has been intensifying for the past decade and has accelerated since the credit crunch erupted.
In recent months, jurisdictions such as Switzerland, the Isle of Man and the Channel Islands have signed information exchange agreements, with the effect of partly eroding banking secrecy, although countries such as Switzerland insist that such agreements require governments to request data on specific individuals suspected of wrongdoing.
PwC estimates that a total of $7.3 trillion of private banking assets are held in international private banking centres outside clients’ jurisdictions, according to data it cites from the British Bankers’ Association.
The largest jurisdiction, Switzerland, holds 27 per cent of such offshore assets, followed by the UK and Luxembourg, the report said.
“Wealth managers will not want to impact their reputations by operating in 'non-transparent' or 'non-co-operative' jurisdictions,” the report said.
It pointed out that offshore centres “have long histories and strong brands in global wealth management, conveying values appreciated by wealthy individuals and families from around the globe, including tradition, honesty and confidentiality”.
The report said that many highly wealthy individuals and families were risk-averse and did not want to keep all their funds in one jurisdiction, which helps to drive the use of such international financial centres.
