Switzerland’s vaunted private banking scene is tipped to shrink further with a third of banks struggling to make ends meet in the face of adverse conditions. An annual health check of the sector has forecast that smaller players could be “driven to extinction”.
This content was published on
2 minutes
When not covering fintech, cryptocurrencies, blockchain, banks and trade, swissinfo.ch's business correspondent can be found playing cricket on various grounds in Switzerland - including the frozen lake of St Moritz.
A study of 87 private banks by consultants KPMG and the University of St Gallen says that 34% were “weak” performers in 2018. That’s a 50% increase from 2017. More than half of this category operated at a loss last year, the report says.
The number of “strong” performers fell from 26 banks in 2017 to 19 this year and is dominated by larger players with at least CHF25 billion ($25.5 billion) of client assets under management (AuM).
The death of banking secrecy five years ago saw an end to the practice of sheltering billions in undeclared offshore assets in Swiss bank vaults. Since then, many wealth managers have struggled to find a business model to replace that cash cow.
They have not been helped by an unhelpful environment of rising regulatory costs, rock bottom interest rates and growing political and economic unrest around the world – presenting a perfect storm for their business.
This explains why the number of private banks in Switzerland has fallen from 163 in 2010 to 101 at the start of 2019. By the end of this year, KPMG predicts the number will drop below 100. There is a “high probability that a significant number of banks will exit the market in the next years,” KPMG says.
External Content
One of the biggest problems facing small banks is that they cannot afford a physical presence abroad, particularly in growing markets such as Asia. This makes it harder to attract new clients and their wealth.
A lot of banks are also struggling to keep a lid on the cost of running their business, as evidenced by the cost-income ratio benchmark. This measures the percentage of annual income that is eaten up by staffing, regulatory and other expenses.
Costs consumed a record 87.2% of income on average for small banks (with less than CHF5 billion AuM), leaving them with a wafer-thin profit margin of 12.8%.
Is reforming the Swiss pension system still possible, and if so, how?
Solutions still need to be found to meet the challenge of an ageing population and to improve the pensions of low-paid workers, the majority of whom are women.
New European space tech centre in Switzerland launches its first project
This content was published on
The European Space Deep-Tech Innovation Centre (ESDI), launched in collaboration with the Paul Scherrer Institute (PSI), is to be located in the immediate vicinity of the PSI in northern Switzerland.
Swiss Federal Railways launches campaign for safety on public transport
This content was published on
The Swiss Federal Railways is launching a campaign for greater respect and safety on public transport, with posters to go up in stations and on trains starting next week.
Swiss scientists to use AI for improved weather and climate forecasts
This content was published on
MeteoSwiss and the Swiss Data Science Center have signed a four-year agreement to make greater use of AI in meteorology and climatology going forward.
This content was published on
Prices of owner-occupied homes rose in the third quarter of 2024 by 0.5%, with inflation affecting both apartments and single-family houses, says the Federal Statistical Office.
This content was published on
The honey harvest is projected to be lower than usual this year, as Swiss beekeepers report harvesting an average of just 16kg of honey per bee colony.
More young refugees in Switzerland following vocational training
This content was published on
More than half of young refugees and temporarily admitted persons between the ages of 16 and 25 are now in training. This is significantly more than five years ago.
One in five Swiss children suffers psychological abuse at home
This content was published on
In Switzerland, one in five children suffers psychological violence, and one in three has witnessed psychological violence between parents, says the association Kinderschutz Schweiz.
Swiss government minister breaks silence over Trump remarks controversy
This content was published on
Transport Minister Albert Rösti explained himself in a television interview on Sunday evening, after being called out for expressing support for Donald Trump.
Swiss Covid expert calls for caution on vaccination recommendations
This content was published on
The head of the vaccination commission would be “even more cautious today” when it comes to Covid-19 vaccination recommendations.
Golden opportunity for fragmented Swiss private banks
This content was published on
The annual study of Swiss private banking by KPMG and the University of St Gallen has found some signs for optimism following a decade of gloom. Profits across the 90 banks surveyed have risen along with assets under management (AuM), which had swollen to CHF2.6 trillion ($2.65 trillion) by the end of last year. “2017…
This content was published on
Although the government has bowed to international pressure and committed to the automatic exchange of information with foreign tax authorities from 2017, the Swiss still have the option of keeping their bank account information secret from the Swiss tax office. “Foreign tax authorities can access any and all information concerning their citizens from Swiss tax…
This content was published on
Releasing its annual Banking Barometer, which measures the performance of the sector in 2017, the SBA found that aggregate profits (profits minus losses) across Switzerland’s 253 banks rose by nearly a quarter to CHF9.8 billion ($10.1 billion). Assets under management (AuM) also grew nearly 10% to reach CHF7.3 trillion. “Even though the current environment is…
You can find an overview of ongoing debates with our journalists here . Please join us!
If you want to start a conversation about a topic raised in this article or want to report factual errors, email us at english@swissinfo.ch.