The return of war to Europe awakens long forgotten fears. The wealthy don't know where to put their money, challenging Swiss banks.
As finews.com indicated a week ago, offshore Latin American clients are concerned about Switzerland's status as a safe-haven after the country gave up its long-standing neutrality by adopting EU sanctions after war in the Ukraine broke out.
But others are seen being increasingly drawn to the country by the exact same events.
«Geneva-based Pictet seems to be seeing a trend towards more new clients from Eastern Europe and the Baltics», sources near the bank say. Another source near a large Geneva-based private bank that declined to be named, confirmed: «We seem to be seeing more queries – even from Germany.»
Bitter War
Given history, having German citizens seemingly consider Switzerland as a safe-haven could be seen as controversial - but many institutions in Zurich are seeing this happen. A source at Julius Baer indicates: «Fundamentally, Switzerland's safe-haven characteristics come to the fore with every crisis. New clients come and they stay.»
The bitterness of the war in the Ukraine has led to a great deal of uncertainty in neighboring countries, with some seeing the conflict escalating to a far larger one between Russia and NATO in the worst case.
Historical Role
That would leave Poland, Hungary, Slovakia, Romania and the Baltics extremely exposed. And, given that, it is not surprising that the wealthy in those countries have been knocking on the doors of Swiss banks looking for a place to store their assets.
Everything considered, that would seemingly restore Switzerland's traditional, historical role - a safe, stable and competent banking hub in the heart of Europe.
Waning Controversy
Recent controversies, such as the «Suisse Secrets» leaks, in which Credit Suisse was accused of banking criminals and corrupt individuals for decades, do not seem to be weighing as heavily on matters as certain media outlets seem to indicate. If that were the case, Eastern European and Baltic clients would not be looking for the values and advantages of Swiss banking as intensively as they are now.
They are still a relatively small proportion of clients in the shadow of Russian, Kazakhstan and Uzbekistan oligarchs. For example, the total assets held by Polish citizens at Swiss banks, in domestic branches and overseas, rose to more than $2 billion US dollars in 2020 from about $1 billion a year earlier, with trends forecasting a further increase. Latvia is also a small market but it has posted a high growth rate. Between 2019 and 2020, assets from that country doubled to just under $500 million.
Political Issues
The conflict has drawn Europe closer together and that means - de facto - Switzerland as well. Banking has been particularly challenged by the recent imposition of a large-scale sanctions regime against Russia. «Swiss banks are consequently implementing national and international sanctions», emphasized Marcel Rohner, President of the Swiss Bankers Association, during a media conference last week.
The question of neutrality is a political issue. Adopting sanctions also shows the values that one represents. «Clients would have to ask themselves why neutrality is a deciding factor in the attraction of Swiss banks», Rohner maintained.
Business Opportunity
Against this background, Swiss finance has a unique opportunity. It is no longer primarily about banking secrecy anymore, even if financial discretion is still a central priority. The younger clients of tomorrow have different priorities.
Protecting against cyber-risks will be one, after banks spent years strengthening compliance and anti-money laundering measures. As the war in the Ukraine is also being heavily fought in cyber-space, ensuring data security will be decisive for Swiss finance's future reputation and the Swiss fintech scene could make an important contribution to that.
Global Demand
Client demands for sustainable investments will also increase massively given the pandemic and the tragic events unfolding in the Ukraine. Switzerland's position as a world leader for sustainable finance will help immeasurably in that regard.
Switzerland had to confront many accusations that it acted too tentatively following the invasion of the Ukraine by sacrificing its neutrality when it adopted sanctions. But that is not looking at the entirety of the matter. Many banks would have had to close EU booked accounts when the sanctions were imposed, as many in the Zurich financial scene have indicated.
But this will be a balancing act, regardless of whether they lose a sanctioned client or end up wrongfully exiting Russian clients. In both cases, their reputation will be on the line.
Not Easy to Copy
But there is one important quality that Swiss banks have not lost. Their ability to cope with crises and repeatedly adapt to the prevailing environment.
«Swiss Banking», which is again in demand, is not very easy to copy as much of its success is due to common sense. In the exact same way that a reputation cannot be bought, but must be earned.
