Swiss Banks Thrive despite Reversals in Client Secrecy

Latest report indicates Swiss private banks resisted client secrecy censures by the US, France and Germany to attract more than 50bn francs ($53bn) of assets since the end of 2007. According to data compiled by Bloomberg says while Zurich-based UBS suffered client defections after write-offs of more than $57bn triggered by the US credit crisis during 2008, the defected funds rather deflected to other banks within Switzerland.

The UBS AG, the leading Swiss bank suffered customer withdrawals to the tune of 248bn francs during the past two and a half years. However, those redemptions were exceeded by net flows into the nation's 19 other biggest banks by client assets.

Credit Suisse Group AG, Pictet & Cie. and Bank Sarasin & Cie. won the most funds, bringing in almost 196bn francs between them. Credit Suisse, Switzerland's second largest after UBS alone, received almost 125bn francs since the end of 2007. In a way, the meltdown period has just executed a shake-up in client switch among domestic banks and client location, namely from Asia, where the number of millionaires rose 26 percent last year, leaving assets within the country logistically untouched.

The Swiss banking industry was almost written off on March 13, 2009 when Swiss government agreed to work with countries investigating tax evasion to avoid being blacklisted as a haven by the Organization for Economic Co-operation and Development. The Swiss have initialled or signed 28 tax treaties since then to implement international standards and help track down tax evaders.

But the latest figures show they have tided over that pressure particularly because the governments which unleashed attacks against the client secrecy of these banks lacked consensus and will. According to estimates last year by Geneva-based broker Helvea, only 16 percent of the 863bn francs held in Swiss banks by European nationals were declared.

Swiss banks hope to retain an element of secrecy by proposing a withholding tax on foreigners' offshore accounts, where client identities would remain secret. It should be recalled that last month Walter Berchtold, head of Credit Suisse's private banking unit opined "Until the question surrounding banking secrecy has been solved, Switzerland will only grow moderately, especially with the western European neighbour states."

By Jose Roy