A new tax agreement signed with Germany, Britain and Austria has the smaller Swiss banks thinking about "phasing out" customers from these countries, while bigger banks like UBS and Credit Suisse are rubbing their hands with glee.
ZURICH - Swiss financial institutions are starting to think about which foreign clients are worth keeping – and which ones aren't.
If clients aren't rich enough, or the potential number of clients in a certain country is too small, it may not be worthwhile for banks to keep them on. Switzerland has signed agreements with Germany, Great Britain and Austria to levy taxes on undeclared assets held in its banks as well as a withholding tax on future client income. These new rules could cost banks as much as $518 million according to the Swiss Bankers Association (SBVg).
As a consequence of the agreements signed with Germany, Britain and Austria, which will come into effect in 2013, many foreign clients may find themselves being shown the door by their bank. According to Sindy Schmiegel of the SBVg, in the run-up to 2013, "it is up to each bank to design their own business strategy – deciding on concentrating on certain groups of clients, numbers of clients, or specializing in specific areas of business."
None of the institutions approached by Tages-Anzeiger wished to openly confirm that they were in fact weeding out clients. The Zürcher Kantonalbank (ZKB) said that it "couldn't generalize;" markets were being looked at individually. "But for certain customers it could mean ending the business relationship," said ZKB spokesman Thomas Pfenninger. A client's degree of wealth might be a determining factor; whether or not the client hails from a national market that is strategically relevant to the bank also matters.
Swiss Postfinance is expected to release a statement in the coming weeks announcing how it plans to deal with customers concerned. For now the general operative rule is that existing clients will be offered a choice either to disclose the existence of their Swiss accounts and assets to tax authorities in their country or to pay a withholding tax in their country of residence. The second option preserves client anonymity.
It is cheaper for institutions if clients disclose the existence of the account and the assets to tax authorities in their own country. Will other Swiss banks, such as Bank Sarasin, wind down the accounts of customers who don't wish to follow this route by year's end? "We have yet to make a final decision," said the bank's spokesman Benedikt Gratzl, but "will take all necessary relevant steps beforehand."
Good news for UBS and Credit Suisse
The crucial questions for each bank are: Should the customers be phased out now, or by the end of the year? What is cheaper for the banks? Should clients be told the disclosure option is the only one they have as far as the bank is concerned and that their account will be closed if they don't opt for disclosure?
The Swiss Bankers Association's Schmiegel says: "For banks that have only a few customers in these three countries, it doesn't make any sense to implement an involved solution for just these few customers."
The entire transition is cause for some disquiet on the Swiss financial scene, say market observers. Smaller asset managers could potentially stop some gaps by focusing on bumped clients and offering them a viable solution. Some institutions might even start specializing in clients from specific regions and jurisdictions.
The transition could lead to clients moving their accounts to big banks UBS and Credit Suisse, who have the wherewithal -- not only the money but also the necessary structures -- to switch over to the Swiss government's new white money strategy. But UBS speaker Dominique Gerster wasn't giving anything away other than: "We are preparing for the withholding tax."
Insiders are counting on clients who left UBS en masse for regional banks in 2009 (after it was threatened with bankruptcy and had to be rescued by the government) making a return to UBS and Credit Suisse. UBS speaker Gerster had no comment on this either, and Credit Suisse remained silent on the matter.
A lot of money is involved. The Boston Consulting Group estimates the assets that could leave Switzerland by 2014 at around $257 billion.
Read the original article in German
Photo - Emerald Ann Bonzi