Singapore "no threat" to Swiss foreign banks

Leemann believes foreign banks can climb any mountain. AIG Private Bank

Singapore's financial market will not drain money away from Swiss banks, Association of Foreign Banks in Switzerland vice-chairman Eduardo Leemann told swissinfo.

This content was published on May 31, 2006 minutes

The 150 members of the association gained six per cent in new investments last year and now manage assets in Switzerland of SFr873 billion ($713 billion), figures revealed on Monday.

Leemann believes the wealthy will continue to bank in Switzerland because the Asian markets are too remote and are not well enough established.

The AIG Private Bank chairman is confident that all banks based in Switzerland can continue to cash in on booming economic conditions by setting up a presence in Singapore and by offering cross border services closer to home.

swissinfo: Were you surprised by the association's annual results?

Eduardo Leemann: I was not surprised that the results were good, but I was surprised that they were that good. I was expecting an average growth of about three to five per cent in new money not six per cent.

swissinfo: Why do you think results beat expectations?

E.L.: There have been some clouds around Swiss banking, but we have cleared a lot of air in the past two years in regard to where we stand with the European Union and taxation. A few years ago people would point the finger at Swiss banking whenever something bad happened and we were always the bad guys, but this is changing slowly but surely.

swissinfo: There were also fears that European investors would transfer their money from Switzerland to Singapore.

E.L.: One has read a lot about this. But if you think about what makes Germans or Italians or French tick, could you imagine that they would give their money to someone in Singapore if they don't know who he is? I think this presents an emotional barrier.

Switzerland may be a bit boring, but if you have money you would feel much more comfortable investing it with the boring Swiss who you can touch than with an aggressive Chinese guy in Singapore who is gung ho and outspoken.

swissinfo: But the threat from Asia will surely remain if not grow?

E.L.: I don't think you have to look at Asia as a threat but as a competitor you can't take lightly. You cannot fight competitors, but you can join them. It is a fact that the Asian region is growing twice as fast as the European private banking markets so you have to go and establish your presence in Asia.

If you want to grow your market in Asia you have to go to Singapore, but [you] don't go there because you think the European investors are going in shiploads to Singapore. That's a bad business model.

swissinfo: Is there too much banking regulation in Switzerland?

E.L.: Regulation is going to increase all over the world and Switzerland must make sure that it remains [within the] average because if we try to do more than everyone else that will put us at a competitive disadvantage.

I had the impression over the last few years that Switzerland was trying to be seen to do more than everyone else, but this is slowly changing. In the last 12 to 24 months the Swiss authorities are starting to become more reasonable and are changing their approach by talking about what good they have done rather than what more they could do.

swissinfo: What role will cross border banking [offering services from Switzerland without having a presence in the client country] have in the future?

E.L.: Cross border financial services are on the increase and even the smaller players are no longer sitting back in Switzerland and waiting for the money to come to them.

In ten years there is going to be a huge wealth creation effect in eastern Europe. But you do not have to set up big operations all over the continent because you can simply sell financial services in neighbouring countries.

swissinfo: Has the German regulation restricting cross border banking harmed Switzerland?

E.L.: There used to be a fear in Switzerland that other EU countries might do the same. The Germans are a very formalistic people so if they issue a guidance then you take it seriously. But the situation has relaxed a bit and the heat has been turned down because people have realised that Germany is not just going after the Swiss banks.

swissinfo: Will banks continue to consolidate?

E.L.: The consolidation trend has to continue but prices are now so high in a seller's market that the likelihood of transactions happening on a weekly basis is relatively small. Foreign conglomerates have unique identities so they would rather buy and look at how they can grow before they move to the selling side.

swissinfo-interview: Matthew Allen in Zurich

In brief

There are about 150 foreign banks in Switzerland, making up 45% of the total number of banks in the country.

The largest is HSBC which manages assets of about SFr140 billion.

In 2003 Germany announced a reinterpretation of existing banking law forcing banks from outside the EU or European Economic Area to register before being allowed access to German customers. The Swiss cabinet described the proposal as prejudicial.

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Key facts

Last year foreign banks in Switzerland administered SFr873 billion of assets, an increase of 17% on 2004.
Profits rose 28% to Sfr2.363 billion.
A total of 69 banking institutes are based in Zurich, 50 in Geneva and 16 in Lugano, with the rest spread around Switzerland.

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