GENEVA: The exclusive Swiss private banking sector has been revolutionised by key players Pictet, Lombard Odier, and Mirabaud, amid a tough new regulatory environment and a crackdown on tax cheats.
On January 1, the elite trio radically changed their business model by ditching the near-unique status of Swiss private banks and transforming themselves into operations almost like any other.
Switzerland’s two-century-old private banking sector has been based on rules which make the wealthy managing partners personally responsible for the money they manage for rich clients.
In other words, if the bank gets into trouble, the partners can lose all their assets, not just those they have invested in the operation.
Drawn from the elite of Geneva Protestants, in a city which was a driving force in the Reformation five centuries ago, Swiss private bankers have over time refreshed their ranks with wealthy, likeminded members from their own community.
Pictet and Lombard Odier have eight managing partners, and Mirabaud, six.
“The eight partners represent up to the seventh generation of bankers at the helm of the company,” said Lombard Odier.
“Since it was founded in 1796, the company has remained loyal to its primary calling, which is to conserve, make fruitful and contribute to the handing down of the assets with which it is entrusted,” it said.
Not being listed on the stock exchange, private banks are not required to publish their results, and are the preserve of a closed circle of clients.
Unlimited responsibility for those who run private banks has long been seen as a selling point for wealthy clients who want the comfort provided by such a guarantee. But the tougher regulatory environment seen since the global financial crisis, and scandals such as the Madoff fraud case in the United States which rippled across the world’s banking sector, have been a wake-up call.
In addition, Switzerland’s cherished tradition of banking secrecy has been battered as governments crack down on tax cheats who stash cash abroad.
The United States has been at the forefront, and in August Switzerland struck a deal with Washington over the thorny issue of undeclared money banked by American citizens.
Swiss banks had until December 31 to decide whether to take part in a US come-clean programme to settle past wrongdoing.
Banks that do so will ward off costly lawsuits but still risk being fined in proportion to the sums involved.
AFP
