The importance of Switzerland as a banking centre came under scrutiny this week when Union Bank of Switzerland, the world’s biggest wealth manager, revealed that it had suffered large net outflows of money in the second quarter.

Once, wealthy types in London, New York and Monaco looking to manage their affairs discreetly turned to Swiss banks as the country’s laws forbade bankers from releasing confidential financial information about clients. But advisers say this is changing as regulators around the globe increase transparency requirements for both onshore and offshore accounts. Recent reports that UBS is being investigated for allegedly aiding US citizens to evade taxes have revived criticism of Swiss banking secrecy practices in both the US and the UK.

“Traditionally, people looking to protect assets and gain some degree of confidentiality have gone to Switzerland and kept accounts there for secrecy purposes,” said one private banker based in London. “But since September 11 2001, there’s been a sea change in attitudes towards due diligence and secrecy and an international standard has been adopted. The importance of confidentiality has diminished as the rules have been stepped up.

“And the world has gotten smaller in terms of trying to be totally confidential. The Swiss don’t have a tremendous advantage.”

The consensus among private bankers is that the fees at private banks in Switzerland are slightly higher than those of London-based banks, with managers in the UK charging 1 to 1.25 per cent for asset management and Swiss banks as much as 2 per cent for the same services. Minimum requirements can also be higher as clients must have at least a quarter of a million Swiss francs to invest, according to the Swiss Banking Association, a trade group which represents the 330 based in the country.

But it is difficult to determine whether clients receive better care. “It’s fair to say that if you are a tax payer, there is no advantage to having your money in Switzerland or Liechtenstein or the British Virgin Islands. If your money isn’t transparent from a tax point of view, no one wants you as a client,” said another senior private banker.

James Nason, spokesman for the Swiss Banking Association, counters that Swiss bankers are sought out for offering more tailored services.

“It’s like buying a Savile Row suit,” he says. “You turn to a Swiss bank if you want a very tailored approach. Do you want maximum returns now? Are your preparing for retirement? Are you running a partnership with your family? It’s a very varied banking landscape here.”

Some Swiss banks are modifying their existing business models which now tend to focus on offering offshore private banking services in Switzerland to foreign clients, according to Winifried Ruigrok, a professor of international management and the academic director of the University of St Gallen MBA programme.

The new model seeks to offer onshore private banking services in clients’ own countries.

In effect, Swiss banks are trying to cater to two distinct types of foreign clients: one seeking offshore private banking services in Switzerland and another seeking onshore private banking services in their own country. But the line between onshore and offshore banking is becoming blurred as authorities become more vigilant about cracking down on tax evasion.

This year, it emerged that Revenue & Customs is investigating the affairs of about 300 wealthy Britons who allegedly secretly salted away more than £1bn in Liechtenstein, a country that is considering plans to make it more difficult for wealthy foreigners to hide money in its banks.

And the next phase of the Revenue’s investigation into offshore account holders is set to be launched over the next few months.

It is seeking legal notices requiring an initial batch of about 25 foreign banks to reveal information about clients with offshore accounts.

Source: Times