Although Swiss private banks increased their asset holdings by four per cent over 2011, more than a quarter of them will likely cease to exist within three years’ time, says a study from a leading Swiss business university.
The University of St. Gallen report shows that the situation is especially critical for institutions holding less than CHF5 billion ($5.3 billion) in client assets. Due to liquidations hitting small establishments especially hard, 13 private banks closed their doors in 2012, bringing the total in Switzerland to 148. The global tax firm KPMG, which was also behind the study, estimates that another 25 to 30 per cent of Swiss private banks will disappear in the next three years.
In addition, nearly a quarter of the 103 institutions examined in the report experienced capital losses last year, and more than half of them reduced their employee numbers in 2012.
As a result of their conclusions, the study’s authors estimate that well-performing markets and asset increases aren’t enough to overcome the challenges currently facing small banks, such as ongoing uncertainty about tax negotiations with several countries, including the United States, as well as the state of the global economy and the regulatory environment.
On Tuesday, it was announced that a new deal was on the table between US justice department authorities and Swiss banks to end an ongoing battle over tax evasion concerns. However, authors of the private bank performance report deemed it too early to estimate what effect such a deal would have on the future of Swiss private banking.
Switzerland’s oldest private bank, Wegelin, closed early this year in the wake of a US criminal investigation into its activities.