Times Are Changing for Swiss Private Banking

If you would like to know which difficulties Swiss banks are facing and how they need to reposition themselves in the market, please read the following article by Claude Baumann from Finews:

 

Times Are Changing for Swiss Private Banking

 

For years Swiss private banks viewed the Asian market as their El Dorado, but the latest wealth trends show they may have to dig for gold somewhere outside their comfort zone.

In the last few weeks, Swiss private banks will have been poring over the annual wealth reports from consultancies and banks because they give a steer on how and where they can best position themselves.

 

Trend Reversal

Over the past ten years, the direction of travel has been clear: Most private wealth was in the U.S. but the greatest growth was in Asia where most new millionaires and billionaires were emerging.

However, the studies show that the coronavirus pandemic has caused the trend to reverse. Wealth is is still growing in Asia, but it is now growing faster in the U.S.

 

Pandemic Hits Asian Wealth Harder

Tuesday’s Global Wealth Report from Credit Suisse shows that this did not come out of nowhere. Next week Capgemini will publish a study which has a similar outlook.

The economic effects of the pandemic were more severe in many Asian countries than in the U.S.. In China, where there was a quicker return to normal, there was only moderate growth in wealth because of domestic restrictions, the ongoing disputes with the U.S. and neighboring countries’ poor response to the second and third waves of the pandemic.

«Excluding the rise in asset prices, many private households’ wealth may well have fallen», the author of the Credit Suisse report, Anthony Shorrocks, said.

 

Wake-up Call for Swiss Banks

By contrast, many of the super-rich in the U.S. have been able to increase their wealth over the last 18 months due to the soaring stock market, the boom in the private equity sector as well as rises in cryptocurrencies.

This should be a wake-up call for Swiss banks which have largely faced east to China, Hong Kong, Singapore and Japan. However, their activities on the other side of the Atlantic have been very limited.

 

Paranoia

Credit Suisse got out when sold its U.S. private-banking business to Wells Fargo in 2015. Julius Bär does not have a presence, but there has been speculation about a branch in Miami. Many Swiss banks have a presence in the U.S. but no banking platforms.

On the one hand, this is down to the very strict laws and regulations in the U.S. financial sector but on the other to a fundamentally paranoid attitude caused by their traumatic experiences in 2009 and 2010.

 

Shadow of Former Selves

At the instigation of some U.S. politicians, there was a real campaign against Swiss banks, which resulted in many of them, who were operating in the U.S. for the first time had to pay large fines and shut down their business in the U.S.

Many Swiss private banks have a special department for U.S. clients licensed by the U.S. regulator but these do a fraction of the business the banks once did.

 

Tricky Business

The difficulties Swiss banks have with U.S. customers due to pressure from the U.S. judicial authorities can be seen in the fact that Swiss people repeatedly have to state when doing business with a bank that they do not have U.S. citizenship.

As a result, many Swiss banks don’t have banking platforms in the U.S., in contrast to Asia.

 

Swiss Banking in Peril

Now that wealth is growing faster in the U.S. than in Asia, Swiss banks have positioned themselves wrongly and could miss out on significant revenues in the next few years. The Swiss banking lobby will need to do a lot of work to put the sector back in the U.S. market in a major way.

In the meantime, Swiss banking runs the risk of losing significant market share to the competition. This consists of U.S. giants such as J.P. Morgan, Goldman Sachs or Morgan Stanley which are expanding their wealth management businesses.

(Claude Baumann, Finews)

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