Nov 09 - The repayment of retrocession fees to clients who have an asset management
agreement with a bank, if applied retrospectively and to all banks in Switzerland, could lead to
significant one-off provisions, Fitch Ratings says.
Without a long look-back period, client reimbursements should be manageable for the Swiss
banks with large private banking operations. To offset some of the lost revenue, we expect the
banks to adjust their management fee structures to maintain gross margins broadly similar to
current levels, which is around 90bp-110bp of assets under management.
The introduction of retrocession fee repayments will improve transparency for private
banking clients in Switzerland. The sector has increasingly focused on performance, servicing,
and increased transparency.
Retrocessions are the fees received by a bank for distributing third-party products to
clients. In a test case involving UBS AG , the Zurich High Court decided in
January 2012 that banks should reimburse retrocession fees to clients with whom they have an
asset management agreement, unless those fees had been received for genuine distribution
services. The Swiss Supreme Court confirmed the ruling on 1 November 2012. Although the
ramifications are not yet clear, this landmark case could set a precedence for all banks in
Switzerland to repay retrocessions relating to discretionary mandates services, bringing the
banks' standards in line with the rules for Swiss independent financial advisors' and many other
The amount of fees to be reimbursed to claimants is still being determined by the Zurich
High Court. At this stage, the magnitude of the impact is difficult to assess. We believe it is
likely to vary considerably from bank to bank depending on the proportion of funds and other
investment products affected.