Swiss financial blueprint inspires Singapore

Keystone

Singapore's growing reputation as a global leader in private banking owes much to the Swiss financial model that has stood the test of time.

The Asian city-state has adapted Switzerland’s banking secrecy laws, much of its tax and trust policy and regulatory framework in a recent drive to reinvent itself.

Reeling from the Asian market collapse of the late-1990s, Singapore convened the Economic Review Committee (ERC) in December 2001. That committee was made up of government, economic and urban planning advisors charged with revitalising the financial marketplace.

The ERC looked at other countries and liked what it saw in Switzerland, according to Roman Scott, a private banking expert with Boston Consulting Group in Singapore and an advisor to the committee.

“They looked at everything from banking secrecy laws, taxation both on interest bearing accounts and capital gains, taxation in terms of residency and trust policy,” he told swissinfo.

“They also looked at other general banking measures such as set-ups, set-up speed of banking operations, regulation. In short, everything was considered from the point of view of how to make things easy, how to speed things up and how to make things more competitive.”

Banking secrecy

One of the first changes was to beef up the banking confidentiality laws by imposing a sentence of $78,000 (SFr98,000) or three years in prison for disclosing information.

In 2004 Singapore amended its trust laws to allow foreigners to sidestep state interference in many European countries that dictates how inheritance is carved up.

That same year Singapore scrapped taxes on foreign investments earned abroad and reduced the corporate tax burden, like many Swiss cantons, to attract more businesses. Tax evasion, as in Switzerland, is not a criminal offence in Singapore unless proof of sharp practice is found.

Switzerland’s financial regulations and framework have not simply been cloned, according to Ng Nam Sin, an executive director at the Monetary Authority of Singapore (MAS).

Singapore has cherry-picked and adapted the most favourable parts, along with attractive features of other countries, to fit into the unique Asian market.

“In fostering growth and development of the financial sector in Singapore, Singapore has looked at various developments in major financial centres such as London, New York, Zurich, Hong Kong, Tokyo and Sydney,” he said.

“Ultimately, the Singapore model is not based on the experiences of any one particular country or city but is a combination of factors that play to our unique strengths.”

Swiss feel

But Singapore is taking on a distinctively Swiss feel not only in the field of regulation, according to Scott. The urban redevelopment currently taking place aims to recreate the ambience of Zurich or Geneva, he said.

“Singapore’s authorities also recognised that part of the success of Zurich and Geneva is the lifestyle the rich enjoy there,” he said.

“They are making massive infrastructural changes modelled specifically on Swiss cities in an attempt to recreate their ambience. They have even gone as far as converting the salt water marina into a fresh water lake.

“You might just as well airlift a high-tech glass, steel and aluminium version of Geneva into Singapore.”

One regulation that did not transfer over Singapore is the recent withholding tax law imposed on Switzerland by the European Union. The tax is levied on the Swiss accounts of foreign nationals on behalf of their resident countries to counter tax evasion.

However, Scott does not expect a flood of wealth emptying from Swiss accounts into Singapore.

“There will be a few people who have a problem with withholding tax. Will that lead to a flow? A bit. Will that be a big thing that really moves the needle? Well not really,” he said.

“Switzerland will not capture the future growth market to the extent that they used to. But the Swiss banks are setting up here so the Swiss government still benefits through tax revenue. Who do the Swiss banks pay tax to? Switzerland the last time I heard.”

swissinfo, Matthew Allen

In brief

The Monetary Authority of Singapore is a government body designed to promote the economic growth of the city-state and to promote it as a financial centre.

Earlier this year, Credit Suisse said it would create 900 new backroom jobs at its Singapore headquarters, which was set up in 2004.

UBS has recently announced plans to set up a wealth management campus in Singapore early next year. The bank believes the campus will enable them to increase client advisor numbers by 20% a year.

Julius Bär private bank will officially open up its Singapore office next month.

Key facts

MAS estimates that Singapore manages around $200 billion (SFr252 billion) of private banking assets.
Switzerland’s share is around $3.71 trillion.
The wealth of individuals with at least $1 million of assets in the Asia-Pacific region will increase by an average of 6.7 per cent annually in the next four years, to $10.6 trillion, according to a recent report by Capgemini and Merrill Lynch.
The number of millionaires in the region rose 7.3 per cent to 2.4 million last year, outpacing the 6.9 per cent increase in North America and 4.5 per cent gain in Europe, according to the Capgemini-Merrill report.