Swiss Bankers Face 'Unprecedented' Challenges
The Swiss Private Bankers Association has recently published details of its 2011 annual report, outlining the major challenges currently facing the Swiss financial centre, particularly in the area of tax, regulation and financial market access.
In its report, the SPBA highlights the fact that the wealth management sector is currently confronted with "unprecedented" challenges, notably with regards the fiscal and regulatory framework.
According to the association, tax issues were of primary concern for institutions in the period under review (May 2011 to May 2012), and will continue to remain so as a number of issues are far from being resolved.
Alluding to the bilateral tax deals concluded between Switzerland and the UK, Germany and Austria recently, the SPBA emphasizes that implementation of these agreements within the specified timeframe will demand “colossal efforts” from Swiss banks, in particular from the country's smallest institutions.
The SPBA points out that the government’s policy of exchanging information in tax matters, agreed back in March 2009, also entered the implementation phase, noting that almost forty new double taxation agreements have so far been negotiated and that the first treaties have already entered into force.
The association warns, however, that the standards now appear to be subject to a dynamic beyond national control, explaining that the admission of grouped requests based on behavioural patters will be the next important development in this area.
Developments in the European Union (EU) arising from the financial crisis and relating to increased financial supervision have forced Switzerland to adapt its national regulations accordingly to ensure that its operators are not cut off from their principal foreign markets and to ensure a level playing field, the association adds.
Confronted with these profoundly mutating framework conditions, Swiss banks have been asked “to reinvent” themselves, the SPBA reveals, explaining that the Swiss Financial Market Supervisory Authority has called on financial institutions to change their business model, without providing the necessary guidance to facilitate the transition.
The SPBA criticizes the Federal Council for endeavouring to develop at national level its “white money strategy”, a new financial market policy geared towards the management of taxed assets. The association stresses that the sector is already subject to external pressures, without new domestic pressures being imposed on them from the government, warning that this will adversely affect competitiveness.
Wealth management forms the backbone of the Swiss financial centre.
According to a report published last year, the private banking and asset management sectors generated gross revenue in 2010 of CHF31.4bn (USD33bn), representing 53.5% of the total income of banks in the Confederation.
With 43.6% of this total, private banking remains by far the main pillar of banking activities, a pillar that is largely dependent on foreign clients. The study showed that three quarters of assets managed by Swiss banks in this sector alone are held by foreign nationals.
With a share of the market of 27%, Switzerland remains the largest cross-border private wealth management market, albeit only slightly ahead of the UK and its satellites (26%), and the US (20%).