Seeking shelter in a time of flux

The banking sector is one of the most important to the Swiss economy. The Economic Significance of the Swiss Financial Centre by Swiss Banking, a July 2012 report by the Swiss Bankers Association, states, “The financial sector accounts for 10.3 per cent of value added in Switzerland (59.4 billion Swiss francs [Dh231.92 billion]). At 260,000 francs per employee, productivity is almost two times the Swiss average. The banking sector alone accounts for 35 billion francs of value added, corresponding to 6.2 per cent of the GDP. Including indirect effects, the added value of the whole financial sector increases from 59.4 billion francs to nearly 90 billion francs, which is equivalent to approximately one-fifth of the Swiss GDP.”
Bankers say the sector, though inherently robust, is undergoing a flux through branding, consolidation, secrecy legislation and their global footprint.
At its best, Swiss banking is known for discretion. Financial institutions that specialise in private banking have traditionally not needed to shout out their presence in the street or from billboards.
“The notion of branding — as a long term strategic asset — is a relatively new concept in the financial industry,” says Eduardo Leemann, CEO, Falcon Private Bank.
 
Brand values
For a very long time, it was enough for a Swiss bank to highlight its location. “In the last few decades, the Swiss financial centre and private banks already had a strong branding and a strong branding impact — by communicating their Swissness and traditional Swiss qualities — and both benefit from strong global brand awareness,” Rémy Bersier, Head Southern Europe, Middle East and Africa, Bank Julius Baer, tells GN Focus.
Banks with strategies in place are now building their brands. “In the past, banks in Switzerland tended to operate within their national borders and to welcome clients visiting them. In a world of increasing mobility and competition, this rather passive approach is no longer viable.
“In today’s world, where everything is going so fast, where communication and marketing play an increasingly important role, financial institutions operating on a global scale need to be rapidly identified thanks to their brand. The idea is to synthesise in a brand a set of values the bank wishes to convey to clients or prospective clients,” says Ludovic Pernot, Chief Executive Officer, Mirabaud (Middle East).
Economists say consolidation is the usual by-product of any kind of churn in the marketplace. This is also the case in the Swiss financial sector. “Yes, the Swiss financial centre is in a consolidation phase,” says Bersier. “Several well-known banks and foreign entities, for example ING, which was taken over by Julius Baer in 2010, have been bought by or integrated into other organisations: Wegelin, Sarasin and Clariden Leu.”
The most recent announcement comes from Falcon Private Bank. “We have agreed to acquire London-based wealth and asset manager Clariden Leu (Europe) from Credit Suisse Group, which will extend our client base in emerging markets,” says Leemann. “The deal is expected to close by March next year.” 
Going forward, Bersier says consolidation and working with other partners is crucial. Julius Baer’s 2011/12 plans include strategic participation with GPS Brazil, opening offices in Tel Aviv and Shanghai, opening an office in Shanghai, strategic partnerships with Macquarie and Bank of China, and the purchase of Merrill Lynch International’s Wealth Management Unit outside the US and Japan.

Confidentiality
That privacy is at the heart of private banking is hardly surprising. “In fact, the rules for secrecy have not really changed that much,” says Pernot.
“Secrecy was never meant to protect criminal activities and what has really evolved is the scope of what has to be considered criminal activities as per Swiss laws and regulations, like the criminalisation of tax avoidance.”
The ongoing debate on tax-related reforms and other regulatory changes has meant that banks strengthen their product. “The crisis has raised the importance of the quality of the investments, the degree of advice and a more conservative approach among clients,” says Beriser, adding that while client confidentiality is central, the law is equally, if not more important. >
“We have a white money policy in place that already requires declarations in certain cases and have restricted certain services. We are adapting it and further enhancing it on an ongoing basis.”
Being Swiss still benefits the banker. Says Leemann: “It is difficult to find a better suited location for private banking. The concept of focusing on private clients’ needs is known here for generations and combined with the geographic location and our outstanding political stability, makes Switzerland still very attractive.”
Swiss banks benefit from a stable political situation and a prosperous economy. Pernot says these are “reassuring factors for clients, particularly those seeking protection from an ever changing environment”.
Swiss banks rank among the world leaders in wealth management. At the end of last year, assets under management in Switzerland totalled around 5,300 billion francs. Swiss banks are market leaders in cross-border private banking, with a market share of 27 per cent, according to the Swiss Bankers Association report.
If the banks have their way, this is set to increase. Julius Baer, for instance, expects, “over 50 per cent of Assets-under-Management (AuM) from growth markets by 2015”.

Emerging markets
The bank wants to further develop its footprint in Asia, making the continent as its second home market, and Brazil and Latin America as the third regional pillar. It plans to benefit from strong economic development in the Middle East and strengthen its presence in Eastern Europe, pretty much taking care of the world.
Mirabaud (Middle East), says Pernot, will strengthen its activities in the region and enhance its understanding of the African market.
Falcon Private Bank already has strong links to emerging markets, as it’s owned by Aabar Investments PJS, a global investment company majority-owned by the government of Abu Dhabi. “Our aim is to become a leading Swiss private banking boutique focussing on emerging markets such as MENA, Eastern Europe, Greater China, including Hong Kong and Taiwan, andt also Western Europe,” says Leemann.
Falcon’s new acquisition is in-line with its global plans. “Clariden Leu (Europe) currently manages more than 2 billion francs AuM (Assets under Management), servicing clients in Eastern Europe, the Middle East and Africa, and other emerging markets,” says Leemann.
“This acquisition brings us one decisive step forward in our ambition to become a leading Swiss private banking boutique focusing on emerging markets.”