GENEVA (Reuters) - For a Swiss private banking industry that is under fire and could see traditional sources of asset inflows dry up, Islamic banking is a unique opportunity that should be grabbed with both hands, one expert said on Thursday.
Mounting international pressure has forced Switzerland to relax banking secrecy rules and come into line with OECD standards for tax cooperation, hitting the traditional markets of wealth managers like UBS. UBSN.VX(UBS.N)
“Swiss private banking is having to adapt to a new world of tax transparency, and former markets will no longer provide the assets under management they once did,” said independent Islamic wealth and asset management consultant John Sandwick.
That means bankers will need to seek new markets to grow business, or even keep it at present levels, he said
“One totally untapped market is Islamic wealth management, where literally no bank offers anything but the most basic services, it’s a huge opportunity for the industry,” Sandwick said.
Sandwick is highly critical of the widespread reliance on real estate and private equity as cornerstones of Islamic wealth and asset management, because it creates a wide deviation from what would be considered prudent asset allocation.
“Money that should have gone to sharia-compliant mutual funds and sukuk funds went to private equity. The market for sukuk funds is $75 billion, but today the actual amount is about $120 million,” he said, referring to recent IFSL data.
Swiss private bankers would do well, then, to broaden out their sharia-compliant product portfolios, he said.
“The low-hanging fruit in Swiss private banking is Islamic Finance. We must start now to ensure global predominance in this fast-growing sector, the stakes are high and the potential market is measured in the hundreds of billions of dollars.”
Editing by Hans Peters