Switzerland may have renewed its reputation as a safe haven for investors in the last few years, but rich Asians are increasingly keeping their money in local financial institutions as the Alpine nation’s appeal as an offshore centre diminishes for these investors.
At a time when wealthy Europeans are pulling offshore accounts from Switzerland, the news that Asians are keeping more of their money at home looks set to further undermine Switzerland as an offshore financial centre.
Just how much money Asians are keeping at home was recently revealed in the context of India, when the country’s finance minister said deposits of money held by India’s rich in Swiss banks fell in 2010 to €1.44 billion (Rs 9295 crore) from around €3.6 billion in 2006.
Much of this money is staying in Asia and a great deal of it is going to local offshore centres like Singapore and Hong Kong. Figures from the Monetary Authority of Singapore showed assets under management in the city- state reached S$1.4 trillion (€811 billion) in 2010, a 13% year-on-year growth. Eighty percent of this money was from international sources, said MAS.
Steffen Binder, research director at Switzerland’s MyPrivateBanking, told CampdenFO that much of the money held in offshore accounts by India and Asia’s rich is remaining in Asia as opposed to moving money to Switzerland.
“The trend now is that Asia is becoming more important economically, say in terms of the stock market, and people are increasingly looking to Asia for good investments. Indian money and Asian money is going to countries like Singapore and Hong Kong, rather than Switzerland,” he said.
In contrast, figures from the Swiss National Bank showed a big outflow of money from abroad. Assets held in Switzerland by private persons from foreign countries shrunk by 28.1% to SFr694 billion (€610 billion) in the period from the beginning of 2008 until November 2009 – the last figures available.
The strengthening of Switzerland’s reputation as an offshore haven and the strong local currency has seen inflows rise in 2010 and 2011. But analysts say much of this money is in short-term deposits and can shift rapidly with a change of sentiment.
But longer-term funds, or money where fees can be earned, continue to leave the country. Much of this is due to wealthy Europeans deciding to repatriate money in offshore accounts in Switzerland to avoid tougher sanctions from their national tax authorities. Tax treaties, like the recently signed one between Switzerland and Germany are adding to the offshore headache for Switzerland.
Since the fracas between UBS and US authorities over offshore bank accounts held by American citizens blew up a few years ago most of the money help by US citizens in Switzerland has since left.
“The fact that Asian money is beginning to leave Switzerland in increasing amounts will add to the woes of private banks operating in the country,” said a private banker.
“Switzerland was hoping they would make up the shortfall of European and US money leaving with money from emerging markets," he said.