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The Decline of Swiss Private Banks

Offshore Account Update

Posted in on January 31, 2018

Just a decade ago, the Swiss private banking industry was thriving as people and companies from across the world were able to invest their money discreetly to hide their funds from taxing authorities. However, a lot has changed as the U.S. government and other jurisdictions throughout the world have been aggressively cracking down on tax evasion.

Numerous banks have participated in the Swiss Bank Program, which is an amnesty program that allows the financial institutions to avoid prosecution in the United States by turning over information on accountholders and paying a fine.  Because so many banks have provided the IRS with accountholder info, those who had accounts offshore who have not yet addressed their tax noncompliance should consult with a Maryland tax lawyer for help as soon as possible.

Swiss banks have also been subject to new reporting requirements. Collectively, all of the efforts to fight tax evasion have destroyed the ability of Swiss banks to provide the guarantee of privacy that helped the banking industry to thrive. 

Swiss bankers are no longer able to hide assets of investors, and this, combined with low interest rates, strict bank regulations, increased automation, and low financial volatility have caused profit margins to disappear. As the Financial Times reports, this has led to a dramatic decline of the Swiss banking industry.

Decline of the Swiss Banking Industry

According to the Financial Times, it remains unclear if the Swiss banking industry will be able to continue to thrive in a new financial marketplace or if the Swiss private banking industry will slowly die off. 

Swiss banks still control approximately $6.7 trillion in assets, although the value of assets under management is far lower than during the peak years in 2007. While this is a substantial amount of assets, during the past three years, the value of investments under the management of Swiss banks has stayed flat even as there has been strong gains in global markets.  The number of Swiss banks also also fallen during this time period, from 195 banks in 2005 to 112 last year.

Currently the banking industry in Switzerland is dividing up into two different tiers of financial institutions.  Some of the largest banks in Switzerland have been able to use their reputation for service to expand around the world, including to provide services in emerging markets like China.

These banks provide strong customer support, such as helping clients to find lawyers in obscure parts of the world, which continue to offer a competitive edge that makes the institutions attractive to wealthy clients.  However, domestic rivals in Switzerland and smaller banks that cannot trade on their reputations and that cannot provide the same level of client services face a much more uncertain outlook, the Financial Times reports.

With the death of the Swiss bank, it may be harder for investors to determine where they should invest if they are interested in moving money to an offshore financial institution. For those who are interested in investing offshore and who want to understand the rules and regulations they may face in different jurisdictions, talking with Kevin Thorn, a Maryland tax lawyer, is advisable.

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