SINGAPORE • Switzerland’s diminishing band of mid-sized private banks should consider teaming up with other firms to expand in Asia and tap into the business of managing the wealth of the region’s millionaires, according to the chairman of the Swiss banking association.
Since the global financial crisis and the end of banking secrecy, smaller Swiss wealth managers have faced heightened competition and swelling regulatory costs, making it tougher for them to spend money on forays overseas, Herbert J Scheidt said in an interview in Singapore.
“When the outside pressures continue in the same way as they have over the last 10 years, there are undoubtedly some banks who feel either to partner, or to exchange their equity with another bank” is a sensible approach, said Scheidt. For Swiss banks considering expanding in Asia, “it makes a lot of sense to engage in partnerships because the world’s too complex to regard everything just as competition”.
Asia’s explosive wealth creation has made expansion in the region a top priority for many Swiss banks, at a time when they are still dealing with the implications of the end of banking secrecy and a global crackdown on tax evasion. Smaller institutions are being especially hard hit by ballooning compliance costs, forcing some out of the business, according to KPMG.
“The wealth creation here in Asia is bigger and faster at the moment than in Europe,” Scheidt said. “A challenge for the Swiss banks is to grow their presence in those areas.”
Since 2010, 56 Swiss private banks, including mid-sized ones, have left the market, reducing the number to 107 as of the end of June, KPMG said in a recent report. Swiss banks spent a combined 500 million francs (RM2.12 billion) in the run-up to the formal end of banking secrecy this year, when the alpine nation started exchanging financial and tax information with selected jurisdictions, Scheidt said.
Switzerland remained the world’s largest offshore centre last year, with US$2.3 trillion (RM9.52 trillion) in assets and about 27% of the cross border wealth management market, Swiss Bankers Association data show. The share stood at 24% in 2016, Scheidt said.
Offshore assets in Hong Kong and Singapore grew three times faster than those in Switzerland in the past five years, a Boston Consulting Group report showed in June. Both cities could become the world’s largest private banking hubs in the next few years because of the Asian wealth boom, according to Bloomberg Intelligence analysts Diksha Gera and Sharnie Wong. Some Swiss private banks are already teaming up with Asian banks.
Julius Baer Group Ltd announced a partnership with Siam Commercial Bank pcl in March to manage the wealth of rich Thais. The following month, Lombard Odier signed a deal to work with Indonesia’s PT Bank Mandiri.
Scheidt chairs Vontobel Holding AG, which has partnership deals with Bank of Singapore, the private banking unit of Oversea-Chinese Banking Corp, and Australia & New Zealand Banking Group Ltd.
Such tie-ups are usually profitable from the start, given that the partners can share existing infrastructure, as well as expertise, Scheidt said. Swiss banks are also forming relationships with financial technology firms, he added.
For big Swiss banks, it doesn’t matter whether their earnings come from Singapore or at home, he said. “For the medium-sized banks who do not have the financial strength to be present in countries but who offer products cross-border, that is different.”