Thu, Dec 11, 2014 page15

• Losing secrecy, Swiss financiers pivot to China

  FINANCE FALLOUT: The need for transparency in banking practices after the global financial crisis have fueled Swiss banks’ interest in China’s wealth

  • AFP, GENEVA, Switzerland
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  Switzerland’s banking sector, facing the end of the secrecy that was once the bedrock of its business, is turning to China as it seeks new markets for the future.

  “One of the first ports that the Swiss financial center is steering for ... is the port of China,” Swiss Bankers Association chief executive Claude-Alain Margelisch told reporters in Geneva, Switzerland, this week.

  “Together with our member banks, we want to make Switzerland an international hub for the renminbi [yuan],” he said.

  Switzerland is set to abandon its long-prized banking secrecy in 2017 when it starts automatically exchanging account details with other nations, and with it goes one of the main attractions of placing money in its banks.

  For generations, investors have paid high fees to Swiss banks to hide their money from tax authorities around the globe, providing a lucrative stream of revenue.

  However, the global financial crisis prompted demands for a tougher regulatory environment. Switzerland was reluctantly forced to accept the new rules, leaving the banks facing an uncertain future.

  Not only are private Swiss banks looking for new sources of revenue, but they have also faced probes and massive fines from nations accusing them of abetting tax dodging.

  “The Swiss financial center and the Swiss banks have recognized the need for action,” Margelisch said. “We have drawn the necessary conclusions from previous mistakes and introduced counter-measures.”

  Last year, Switzerland still held 26 percent of global offshore assets, or US$2.3 trillion, according to an analysis by Boston Consulting.

  However, Nicolas Pictet, president of the Geneva Financial Center, which represents hundreds of banks and financial companies, said in October that the sector must wake up.

  Pictet, a managing partner in his family’s eponymous bank, said Geneva must stop “behaving like hedgehogs on a freeway,” as they risked losing out to other financial centers.

  Many now believe that China could be the answer.

  Margelisch said relations between China and Switzerland were stronger than ever, referring to a free-trade agreement signed last year that came into force this year.

  Officials from both sides have met twice in the past year to discuss finance, while national banking associations held their first “financial round table” in June.

  The Swiss National Bank and the People’s Bank of China also reached a bilateral swap agreement — a currency exchange deal — in July.

  Such moves were “small steps,” Margelisch said, but he insisted that things were moving forward.

  The next step would be for a Chinese bank to open a branch in Switzerland, he said, acknowledging that was a decision for the individual bank.

  He also identified asset management as an area for growth — Switzerland is a minor player in a sector dominated by London, New York and Hong Kong.

  However, he acknowledged that there may be visa issues, as many of the small teams who managed the wealth of pension funds and firms were from outside the EU.

  “We will ask for visas when the moment comes,” he said.
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