Adaptable Swiss banks magnet for wealth
A detailed study into Swiss wealth management shows how banks have tapped into global markets in recent years to attract the assets of the rich.
The amount of wealth invested in Switzerland last year is set to eclipse the SFr4.4 trillion ($3.53 trillion) in 2005. The Swiss Bankers Association says overseas expansion and diversification is behind the growth.
Switzerland's status as the third largest wealth management centre in the world looks safe according to the most recent figures. A report published by the Swiss National Bank last October estimated that SFr4.77 trillion was deposited in the country.
Swiss banks increased their number of foreign branches by a third between 2000 and 2005 while bolstering foreign capital investments fivefold to SFr70 billion in the last decade.
At the same time, international financial institutions have been flooding into Switzerland, doubling the amount of wealth they administer in the country to SFr29 billion.
But while coffers have been swelling, the banking sector has been diminishing in Switzerland. At the end of 2005 there were 32 per cent fewer financial institutions sharing the distribution of wealth in the country compared with 15 years ago.
The recent spate of consolidation has witnessed over 60 acquisitions or mergers involving Swiss institutions in the last five years.
Banks and other wealth managers have had to innovate to cope with the changing global conditions.
The Swiss Bankers Association says institutions have evolved into three distinct categories.
Larger players have engaged in a wide array of integrated banking services while small boutiques have cornered niche markets. The middle-market has generally opted to strip non-core operations by in- or outsourcing other activities.
The report concludes that the Swiss wealth management industry faces tough challenges, including increased competition, erosion of margins and regulatory pressures.
But Bankers Association spokesman James Nason believes Switzerland is well positioned to cope with these challenges.
"Other international financial centres are of course seeking to increase their market share of international private banking and sometimes attempt to emulate the Swiss model," he told swissinfo.
"However, banking Swiss-style requires a certain operating environment without which it is simply impossible to serve wealthy private clients.
"As a location, Switzerland also has long-standing experience in the wealth management business and a tradition of innovation and quality coupled with a huge pool of internationally-experienced bankers. This combination of locational advantages is not so easy to clone."
swissinfo, Matthew Allen
Global private wealth rose from $30.7 trillion in 2004 to $33.3 trillion in 2005. It is expected to grow to $44.6 trillion by 2010, according to some estimates.
The UBS bank is the world's biggest wealth manager, looking after some $2 trillion of assets. Credit Suisse is the eighth largest with $1.13 trillion of managed wealth.
At the end of 2005 there were a total of 337 different banks in Switzerland, compared with 484 in 1990.
Of the SFr4.4 trillion of wealth managed in Switzerland, SFr2.6 trillion comes from foreign clients and SFr1.8 trillion from domestic clients.
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