June 18, 2014 / 6:22 PM / 6 years ago

Stability to aid Switzerland in fight for offshore cash

GENEVA (Reuters) - Switzerland’s skill and stability will help the country maintain its position as one of the worlds’ most popular places for foreign money, private bankers said.

A Swiss flag flies over the Jet d'Eau (Water Fountain) on the Mont-Blanc bridge over Lake Leman in Geneva March 21, 2014. REUTERS/Denis Balibouse

A global tax crackdown and tighter regulation have weakened the Alpine nation’s appeal to the wealthy in recent years, threatening its position as the world’s largest offshore cash center with roughly 2 trillion Swiss francs ($2.22 trillion) in assets.

A survey last year predicted Singapore would dethrone Switzerland as early as 2015 as the world’s top center for managing international funds, but UBS’s UBSN.VX head of private banking said Switzerland’s strengths went beyond its tax-haven appeal.

“Switzerland is still attractive,” Juerg Zeltner told the Reuters Global Wealth Management Summit in Geneva. “It’s still like German cars for Germany. Switzerland has a very good reputation abroad.”

The country boasts an unemployment rate of just 3 percent, a stable and consensus-driven political system, and a safe-haven currency that is showing no signs of weakening. Its economy is forecast to grow by a solid 2 percent this year and by 2.6 percent in 2015.

Private bankers told the summit this stability, combined with a long history in private banking, will mean the wealthy will want to keep a portion of their cash in the country, even as Swiss secrecy laws are loosened.

The head of Spanish lender Santander’s (SAN.MC) international private banking arm drew parallels between Switzerland and his base of Miami, which he said was attractive because it provides the wealthy in emerging Latin American countries easy access to developed economies.

“Switzerland is becoming the same,” Alvaro Morales said at the summit, held at the Reuters office in Geneva. “I foresee that the future of Switzerland will become more similar to the Miami one.”

However, some industry observers have cautioned that, while Switzerland’s safe-haven status will continue to lead the wealthy to park some of their cash in the country, it may lose out to competitors like Singapore and Hong Kong in the race to act as primary wealth managers, the industry’s most lucrative prize.

To make up for lost earnings in the Swiss private banking business, the head of Coutts’ international operations suggested Swiss banks should look to invest in their asset management business. Switzerland is attempting to reinvent itself as a center for asset management, where it currently lags behind countries such as Luxembourg.

“I do hope Switzerland will increase its footprint and expertise in the asset management industry,” Coutts’ Alexander Classen said at the summit. “That’s where I think Switzerland still has a strong card to play but it will have to either develop and nurture talent locally, or attract some of the world class asset managers in the years to come.”

Editing by Elaine Hardcastle

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