Switzerland's broken model
Euromoney Limited, Registered in England & Wales, Company number 15236090
4 Bouverie Street, London, EC4Y 8AX
Copyright © Euromoney Limited 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Switzerland's broken model

The clubby world of private banking is under threat. The UBS/Julius Baer deal shows how tough it will be for foreign banks to break into the market.

By almost doubling assets under management and market capitalization after acquiring three private banks and GAM from UBS, Julius Baer throws down the gauntlet to the private-banking industry in Switzerland. The pace of consolidation is stepping up.

It's the inevitable response to the challenges facing an industry in which 70% of the total $1.8 trillion assets under management – according to estimates from Boston Consulting Group – belong to European citizens whose national governments are making it less attractive to keep assets offshore. At the same time as the costs of new regulations to prevent money-laundering are weighing heavily on the smaller private banks, those banks' clients are demanding better service and increased access to top-quality investments products that the banks don't have. The result: costs are up, client assets are stagnant or declining, margins are shrinking.

The old business model for Swiss private banking is basically finished.

Bank owners face two choices. They must bulk up to spread various costs: in particular compliance; investment in world-class IT to support better advice and open architecture access to products; and acquisition of wealthy customers from outside western Europe who might be persuaded to lodge their wealth offshore in Switzerland.

Gift this article