Tax deals may cost banks billions of assets

Swiss banks could lose around SFr47 billion ($51 billion) in assets as a result of tax agreements made with Germany and Britain, according to a Booz & Co. study.

Banks and wealth managers may also face a shortfall of SFr1.1 billion in annual revenue, or around four per cent of the 2010 total, a report published on Tuesday said.

Switzerland reached bilateral tax agreements with Germany and Britain in August this year. The Swiss-designed Rubik tax treaty system promises to weed out undeclared assets and hand over tax to other countries instead of the names of tax dodgers. The accords are due to enter into force in 2013.

Booz estimates that there was SFr2.05 trillion in Swiss bank accounts from abroad at the end of 2010, of which SFr270 billion belonged to British and German clients. It believes that around 60 per cent have not been taxed. The 35 experts contacted by Booz for the study estimate that 25-30 per cent of these monies will be withdrawn.

Further bilateral agreements with other western European countries could double the losses felt by banks, the report said, which could lead to a consolidation of Swiss private banking.

However, the Rubik deals agreed with Germany and Britain have been placed in doubt with the European Commission threatening legal action. Neither have yet been passed by the respective governments of each country.

Booz & Co pointed to some long-term advantages if the treaties are rubber stamped. Client privacy would be maintained and Switzerland would still play a leading role in cross-border asset management, Booz said.