World Report

Private and discreet, banks must now learn to ply their trade successfully on the world stage

Roth
‘The market is extremely well-regulated and has an excellent reputation’

anks are to Switzerland what cream is to strawberries. The combination is so successful it is impossible to think of the one without the other.
The Swiss banks’ reputation for solidity has made the sector one of the major pillars of the nation’s economy. And if it is true that they have also acquired something of a reputation for secrecy, Urs Roth, chief executive of the Swiss Bankers Association, is swift to defend the integrity of his members, of which there are more than 400.
“The Swiss financial market is extremely well-regulated and has an excellent reputation,” he says. “We are also very much focused on fighting financial crime.”
The Swiss legal code has led the way for many countries adopting anti-financial crime measures – only recently have US securities houses adopted a “know-your-customer” policy. And US regulations governing “politically exposed persons”, those from countries where bribery and corruption are endemic, were derived from Swiss rules.
The banking sector accounts for about 11 per cent of the overall Swiss economy. There are around 110,000 people working in the sector and they earn a third more than the average Swiss salary.

Bonna
‘The biggest challenge is to provide quality service on an international level’

Asset management accounts for more than half of the banks’ business, of which an estimated 85 per cent is generated by private clients. The Swiss banks are global leaders in cross-border asset management – handling the wealth of customers living abroad. Tiny Switzerland is unique in having four financial centres – Zurich, Geneva, Basel and Lugano. Jean Bonna, managing partner of Lombard Odier & Cie, one of the biggest private banks in Geneva, says: “Geneva is the second financial centre after Zurich. But we have managed to develop one speciality and that is wealth management and in that we are at least as important as Zurich.”
He adds: “A large number of foreign banks want to establish here. Deutsche Bank, for example, chose Geneva, rather than Zurich, even although the language is different here.”

Rossier
‘Our proposals for a new withholding tax will totally preserve banking secrecy’

Four-fifths of the population live within 80km of a foreign border and Mr Bonna says the Swiss are more sensitive now to external pressures, not least of which is the fact that Switzerland is not in the eurozone. “In terms of European rapprochement, Switzerland is more isolated than 20 years ago,” he says.
Mr Bonna, who is president of the Association of Genevan Private Bankers, adds that the biggest challenge facing Swiss financial institutions “is to provide a quality service on an international level without changing the nature of private banking”.
It is the Swiss desire to preserve privacy in banking that has led the country to offer an alternative to European Union proposals for harmonisation in tax regulations. Jacques Rossier, an associate partner at Genevan private bankers Darier Hentsch & Cie, outlines the proposed new withholding tax. “It would enable Switzerland to levy on an anonymous basis a tax on interest earned by Swiss accounts of people domiciled in the EU. It would totally preserve banking secrecy.”

Fighting crime: measures now used by countries like the US have been derived from the Swiss legal code Mr Rossier says the banks would levy the tax, the money would then be remitted to the government and from there it would go to the EU. “We think this is very significant: there are not many cases in history where one country has agreed to levy taxes on behalf of another.”
Pierre Mirabaud, partner in the small Geneva-based private bank Mirabaud & Cie, believes investment strategies have changed considerably since the last quarter of 2001. “We are not in a period of making money, we are in a period of preserving money. It is very disappointing,” he says.
One advantage for private banks, however, is that they do not have to publish quarterly figures “or talk to financial analysts” says Dr Mirabaud.
“Frankly, we do not care at all about our quarterly figures. We look at what we feel is best in terms of investments and in terms of development and the future of the bank. We can invest the equity of the bank exactly as we want without having to look at short-term results.”