Client Managers To CIS/Russia Market Are Nervous About Swiss Banks - Report

Tom Burroughes

8 October 2012

Some senior private bankers with clients in the CIS/Russia segment avoid working at traditional Swiss banks and prefer other options due to concerns about the ongoing crackdown on the Alpine state’s tax haven status, a recruitment firm says.

“Due to the instability of the current market in Switzerland, many senior private bankers, particularly in the CIS/Russian segment, are more interested in looking at alternative institutions,” according to Carlton Senior Appointments, which issued a briefing note on the Swiss market and sent exclusively to this publication.

The document examines the environment for bankers with clients in Eastern Europe, pointing out that Russian authorities, for example, will from January 2013 have the power to obtain data of Russian nationals using Swiss accounts. The report states that this new power may already cause a “large amount of movement in these markets in Switzerland”.

One consequence will be that many banks will refocus attention on Middle Eastern markets, especially via Geneva, the report said.

As explained at this publication (see here) recently, Switzerland’s traditional bank secrecy laws, which in their current form date to 1934, are under assault, prompting the industry to change its business models.

The consequences of a tougher global compliance regime are potentially large for a country that generates about 11 per cent of its gross domestic product from banking and finance. According to a 2011 Booz & Company survey, deposits by western high and ultra high net worth individuals totalled SFr850 billion (around $915 billion), of which an average of 61.5 per cent was undeclared. Broken down further, German deposits of SFr210 billon included SFr126 billion undeclared, and from the UK's deposits of SFr60 billion, SFr38 billion is assumed to be undeclared.

Compliance

The Carlton report notes that “nearly all the banks are looking for CIS/Russian assets. For every bank which does not accept a 'non-compliant' Russian client, another bank will find a way to do so”.

In evaluating the most suitable kind of institution to work for, Carlton said that small and medium-sized houses find it difficult to gain market share among East European assets as these institutions do not have the visibility of a prominent brand or large support teams, nor do they have the freedom of independent firms.