Private banking in upheaval

20th October 2009. A study carried out by the Institute of Management (IfB-HSG) and KPMG shows that private banking in Switzerland faces fundamental change. However, in the view of 30 leading private banks, the sector has really only just begun to analyze the situation and not yet launched the process of making adjustments to their business strategy.

Growth primarily abroad
Growth will occur primarily abroad and there is a question if enough Swiss banks in their current form are well positioned to take best advantage of this trend. Some of the traditionally strong selling points such as tax advantages, banking secrecy and its regulatory environment are not easily portable abroad. The extent to which Swiss private banks will share in the growth depends on their capability to adapt to the new circumstances.

In Switzerland, consolidation is expected to accelerate. Opinions expressed by private banks as to whether the near future holds growth or a very sharp decline in the amount of assets under management vary greatly.

Private banks under attack
A deepening economic crisis, curbs on off-shore banking, growing demands for transparency (from both clients and regulators) and increasing pressure on margins. Many Swiss private banks may be forgiven for feeling they have spent much of the past two years under attack. Furthermore, the Swiss private banking market is likely to contract over the next few years and there may be stiffer on-shore competition for domestic clients.

Confidence is higher about growth outside Switzerland, and there could be light at the end of the tunnel for those banks that get it right. Opportunities may exist for those able to adjust to the “new era” of cross-border activities, capturing burgeoning client segments and perhaps taking advantage of attractive M&A prospects.