GENEVA — Adrien sees himself as a survivor, even referring to the miracle of his survival. Like dozens of others, this Geneva banker used to manage the money of clients from neighboring countries, including France, at one of the Swiss city’s big local banks. That was before his transformation into a merciless “cleaner” of undeclared portfolios.
Everything started around three years ago. One after the other, the banks realized they’d have to push their clients into declaring their accounts with the tax authorities in their home country. If they didn’t, these Swiss banks could face trouble with the foreign authorities.
Thus Adrien* found himself at the heart of the transformation of this global financial center. Switzerland stopped making the distinction between tax evasion and tax fraud — and the UBS scandal in the United States is in the process of dismantling the fabled Swiss banking secrecy practices.
“Before the regulatory framework had even changed to take this new reality into account, the banks spontaneously changed their practices and took measures to protect themselves,” Adrien explains.
Measures? They gave orders to the portfolio managers of private clients to push the clients either to declare their accounts with their home authorities — or leave the bank.
Taking into consideration both the size of the portfolio and the value of the assets, small accounts were to be closed first. For that, each client had to be contacted personally in circumstances that could often be quite tense.
“We were killing them, pure and simple, because we had no alternatives to offer them,” says the banker, still dismayed and bitter at having “betrayed” these longtime clients.
Still, as noted by another banker, Antoine*, the clients were often quite willing because they’d been living with the fear of criminal suits from tax authorities in their home countries. “We really could do nothing for them except give them the name of a law office that could handle the regularization process,” he says.
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Photo: Roger Schüeber
While Adrien was ultimately able to find another job as an asset manager at a smaller bank, Antoine is still dealing with the regularization of his clients. The “cleaning” process began in early 2013 for this employee of a foreign bank in Switzerland — and the end is not in sight.
Value destruction
“I’m ashamed of the job I’m doing,” the 30-year-old admits “We were supposed to create value for the client but now we’re destroying it for the bank.”
The bank, he says, has no compunction about doing anything required to save its image — “turning over clients, firing staff — everything can be justified if it serves the bank’s survival.”
For weeks colleagues have been leaving because they can’t stand the work they are now being asked to do. “It’s not just because we have to deliver a disagreeable message to the client,” says Antoine, adding that reactions are often far from serene. “But there are cases where we have to check certain documents over three times because the bank is so afraid that the assets haven’t been correctly declared.”
This is a 180° turnaround, because up to now “the bank did not concern itself with its clients’ tax positions.” He estimates that some 10% of his time is spent on real asset management while the remaining 90% is devoted to “cleaning” portfolios.
“We’ve become a kind of de facto strong arm for the tax authorities. We’re no longer doing our work as asset managers.” As things stand now, Antoine estimates that he’s lost about half of the assets entrusted to him.
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Photo: peter castleton
Banking consultants Georges Zecchin and Natacha Polli confirm that “some employees spend their days calling clients to either throw them out or at least try to convince them to declare their account with their tax authorities.”
Some countries want to make an example of repeat tax cheats and inflict heavy penalties on them. Others show varying degrees of indulgence and offer fiscal amnesty packages.
For these two former bankers “the way the banks do things also plays a role. It is possible to handle things with a certain amount of elegance even if the process is delicate,” says Zecchin. “Some banks have managed this by carefully explaining what’s at stake to their clients. Others opted for standardized methods that are more rapid and effective but also more brutal.”
The situation is all the more difficult because the bankers are aware that “they’re preparing their own funeral,” says Adrien. While clients have seen their assets melt away after having paid back taxes, or have moved their assets from Switzerland to more opaque financial centers, their bankers find themselves at loose ends.
“We’ve betrayed people that we had developed relations of trust with over a period of years, sometimes decades,” says Adrien. “Those ties are now broken; we’ve cut off the hand that fed us.”
Some bankers are aware that the next step for them will be their own “clean-out.” At some banks, “we hear of entire desks being decimated,” Antoine says.
Naming names
The disappointment and bitterness can also turn against the bank. Squeezed between a rock and a hard place some employees aren’t as loyal as they were in the past. Georges Zecchin and Natacha Polli acknowledge that “the banks’ fight for survival is sometimes detrimental to the protection of their employees.”
The resolution of the dispute with the United States is an example: At Washington’s request, the banks chose to hand over data that included the names of certain employees. The banks didn’t believe they were putting the employees in question at risk, but that view was not shared by many of them. “The banks have to come to grips with this issue to avoid giving their employees the impression they are cannon fodder,” the Polli warns.
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Photo: Geraint Rowland
Frédéric Kohler, director of a local training institute for bankers, the Institut Supérieur de Formation Bancaire (ISFB), notes that the tradition of asset managers staying employed by the same bank for decades is disappearing. Speaking at a round table discussion on jobs in finance organized last November by the University of Lausanne, the trainer, a former bank employee, believes that “seniority is usury, not competence,” adding that “banks today are in a neo-Darwinist phase.”
It’s a high-risk situation that turns human resources directors into “human-risk managers,” Kohler says.
Georges Zecchin does not see the situation as desperate as some players in the sector describe. “Sure, there are employees who have to deal with clients with no future in Switzerland while their own futures may be compromised,” says Zecchin. “But you also have parallel to that a large number of employees devoted to creating new relations and new activities.”
Now it remains to be seen if the iconic Swiss financial center will emerge strengthened from this tumultuous period. “Switzerland’s market share continued to rise between 2008 and 2014 despite the present trouble,” says Zecchin. “That shows that the slaughter we feared, such as loss of 25% of jobs, doesn’t look as if it’s going to happen.”
Indeed, all point out that the requirements to declare assets does not apply to many emerging regions of the world. Even the most discouraged bankers will find opportunities to reinvent themselves, either inside the traditional banks or in new players in the world of finance.
*not real name
