Global scrutiny: Swiss banks' assets dip to 4-year low

Amid a growing global scrutiny of overseas funds deposited in Swiss banks, the quantum of total foreign assets managed by them has dipped by nearly 300 billion Swiss francs (about Rs 20 trillion) since 2008.

Also, the share of foreign client assets in Swiss banks dropped to 51 per cent of their total asset under management at the end of 2011 -- the lowest in four years.

The foreign clients have traditionally been the mainstay of Swiss banks' wealth management business. But growing pressure from foreign governments for action against possible hoarding of illicit wealth in Switzerland has been acting as a dampener in the recent years.

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As per the latest data compiled by Swiss Bankers Association (SBA), the apex body of banks in the country, the total asset under management in Switzerland stood at 5,300 Swiss francs at the end of 2011.

This included 2,700 billion Swiss francs (51 per cent) of foreign clients and the remainder 2,600 billion Swiss francs (49 per cent) of domestic clients.

The foreign clients' share has declined for three straight years in a row -- from 52 per cent in 2010, 55 per cent in 2009 and 56 per cent at the end of 2008.

The total assets of foreign clients stood at about 3,000 billion Swiss francs at the end of 2008.

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These assets include value of securities held in client portfolios, fiduciary deposits, amounts due to clients in savings and investment accounts, as also from time deposits.

The decline in foreign client assets has come at a time when Swiss banks are recording an increased number of complaints from their overseas customers.

Switzerland's banking ombudsman said last week that the number of complaints from foreign customers rose in 2011, even as their overall customer grievances fell. It did not give any specific figures of complaints from Indian clients.

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While Indians are alleged to have stashed large amount of worth black money in Swiss banks, the official data of Switzerland's central bank, Swiss National Bank (SNB) puts the funds of Indian clients in Switzerland's banks at a modest 2.18 billion Swiss francs (Rs 12,700 crore) -- which is just 0.14 per cent of total foreign wealth there.

Indians' money in Swiss banks rose for the first time in five years in 2011.

These official figures, described by SNB as 'liabilities' of Swiss banks towards their clients from various countries, do not indicate the quantum of the much-debated alleged black money held by Indians or other nationals in the safe havens of Switzerland.

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Also, SNB's figures do not include the money that Indians or other nationals might have in Swiss banks in others' names.
Noting the Swiss banking centre continues to face major challenges, SBA said a greater focus was required to tap additional growth opportunities.

This in turn would need "both political and regulatory improvements and better cooperation between authorities and the institutions being supervised in the interests of the banking centre," it said in its report titled 'Banking in transition - Future prospects for banks in Switzerland'.

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"The main issue here is to further strengthen the innovative power of Swiss asset management so as to be able to continually come up with new ideas and products that are also attractive for foreign retail and institutional investors," it said.

The SBA also called for steps to tap into "the dramatic growth in the economies and levels of wealth in emerging markets and particular client segments (such as the opportunities arising with high net worth clients with assets of more than 100 million Swiss francs)".