Private Banks Face Tough Times Ahead In Switzerland

by Ulrika Lomas, Tax-News.com, Brussels

06 June 2002

Following the announcement earlier this week that two of Switzerland's oldest private banks are set to merge in order to compete against larger competitors, economic analysts have predicted tough times ahead for the low tax jurisdiction's smaller and more traditional financial service providers.

Speaking to the Swissinfo news service, editor-in-chief of the weekly 'Cash' newspaper, Dirk Schutz said that the merger between Lombard Odier and Darier Hentsch was almost inevitable, given the size of the banks and the current climate within the Swiss banking sector. 'It was only a matter of time,' he observed.

According to recent reports, private banks in Switzerland are struggling to attract new customers because their larger rivals, such as UBS and Credit Suisse have moved more towards the provision of services to high net worth individuals as retail banking profits have dwindled. Weak equity markets, international pressure for tighter regulation of offshore centres, and rapidly developing information technology requirements have also been cited as factors which have squeezed some of the country's smaller private banks out of the race.

However, it's not all doom and gloom for the Swiss private banking sector, according to Mr Schutz. As pressure to clamp down on providers of 'offshore services' (as perceived by high tax OECD and EU member states, at least) has increased, many private banks are looking to develop their 'onshore' repertoire, he revealed.

The Cash editor told Swissinfo that, paradoxically, the recently announced merger also demonstrates the strength of the Swiss private banking sector in an international context:

'It shows that the Swiss players are still strong enough to find solutions within the country. They don't need help from the outside,' he explained, adding that: 'It's better for the financial centre of Switzerland, and especially of Genenva, that two Genenva players are merging.'

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