Gloomy Outlook For Offshore Private Banking Profits

by Ulrika Lomas, Tax-News.com, Brussels

13 May 2003

A survey of the 105 top European private banking institutions has concluded that billions of dollars in revenue could be lost in the offshore banking sector as a result of the current attacks on bank secrecy from measures such as the EU Savings Tax Directive.

The survey, conducted by IBM Business Consulting predicted a five per cent decline in offshore banking revenues this year, mirroring a five per cent fall in 2002, leading the report to conclude: "The traditional European offshore model is dying. Banks must restructure to survive."

Under particular threat, the study said, was the Swiss private banking industry which has been Europe's largest offshore banking sector for decades. Some 55 to 60 per cent of non-Swiss money was from EU member state origins and not declared to the appropriate tax authority, claimed the report's author Ian Woodhouse. "Clearly, Switzerland is most at risk because of its dependency on EU-originating money," Woodhouse explained.

Woodhouse also highlighted the danger of tax amnesties to Swiss banking revenues. A recent tax amnesty in Italy caused EUR300 billion to flow out of the country's banks said Woodhouse, resulting in lost revenues of EUR300 million. The consequences of a similar amnesty currently under consideration in Germany would be even more severe given the higher level of German money in Swiss banks, the report's author said.

According to Woodhouse, Switzerland's position at the head of the private banking league was under threat as other jurisdictions caught up, most notably Singapore, which the study says is expected to be the second most important offshore banking centre by 2005.

However, Woodhouse remained generally pessimistic over the global industry's outlook, predicting that profits will slump by one third this year.

Recommended