Offshore

Switzerland Contemplates Life After Bank Secrecy - Breakfast Briefing

Tom Burroughes, Group Editor, London, 20 July 2016

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Switzerland is gearing up for a world after bank secrecy, but a conference has heard that some jurisdictions are not getting the transparency message.

Swiss banks have, with some exceptions, moved away from secrecy and towards a more compliant business model but they operate in a world where the world’s largest economy, the US, does not always obey the rules it calls for, a Breakfast Briefing heard recently.

The event, called Switzerland – will it remain a key centre of wealth management?, focused on how the financial industry of the Alpine state has had to adjust, and what challenges it faces in the future. Topics such as the impact of financial technology and rising client expectations were given an airing. 

The briefing was held a month before financial markets and the political world was shocked by the UK vote to leave the European Union; as a non-EU nation (although with access to the EU’s Single Market), Switzerland’s banking industry has looked upon the UK development with close interest. Another saga that has affected the private client wealth management sector, has been the “Panama Papers” affair; there was some discussion of the issues around the leak of a vast trove of documents from Panama-based law firm Mossack Fonseca earlier in the year.

Panellists were Chris Hamblin, editor of Offshore Red and Compliance Matters (sister news services to this one); Christine Ciriani, managing partner and head of Switzerland for Capco Consulting; Jean-François Bunlon, market head, managing director Swiss domestic, Geneva location head, HSBC Private Bank; Jorge Yui, vice president, digital banking strategy advisor, JP Morgan; Osmond Plummer, managing director, Wealthcoaching.ch. The panel was chaired by your correspondent. The event was sponsored by ERI Bancaire.

“The number of wealthy clients around the world keeps growing and Switzerland remains the place to be,” Yui said in a confident assessment of the country’s staying power as a financial force. 

One major issue, however, Yui said, was that as a result of rising regulations such as around know-your-client (KYC) and checks for politically exposed persons, it can take on average two months to take on a new client, a situation not seen in any other field of commerce. A big challenge, which technology can help with, is to improve the client experience. While technology can help resolve some issues such as to do with onboarding clients, it can also cause new complexities, he said. “JP Morgan has put in a very expensive system to onboard clients,” he said.

Asked about the recently-concluded US Department of Justice programme with Switzerland, through which 80 banks reached non-prosecution and related agreements with US authorities, Capco’s Ciriani said the programme has taken on “negative connotations”. Banks have become tax collectors for governments. “Unfortunately, the way the Swiss government handled the matter meant it looked uncoordinated and the US prosecutors adopted a 'guilty until proven innocent' attitude during the subsequent examinations," she said.

Hamblin noted that in the changed atmosphere, some private banks have moved away from their old unlimited liability family structures (such as Pictet, Lombard Odier and Mirabaud). “That is a lack of confidence that banks have in themselves and evidence of the aggressiveness of US action,” he told the briefing.

Capco’s Ciriani said the Swiss government probably was unaware of the full extent of the impact of the US tax programme on both the global reputation of Switzerland and financially on the banks. However, following the financial crisis, when banks such as UBS were receiving bailouts, the public mood at the time was that banks should be reined in.

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