Swiss Banks No Longer Have It All Locked Up

It is a model that has worked for decades, centuries even, as foreign potentates, politicians and the plain rich have sought a haven for their wealth.

But recently, behind the immaculate facades, signs have emerged that confidence may be slipping. Data are hard to find in an industry noted for discretion. But what evidence there is suggests that Switzerland, once a byword for private banking, is no longer casting its special spell.

The oldest and most traditional banks, such as Pictet and Lombard Odier Darier Hentsch in Geneva, still bear the names of their founding families. Tightly run by partners bearing unlimited liability, they are under no obligation to publish figures.

Others, such as Zurich's Julius Baer and Vontobel, or Basel-based Sarasin, must be more forthcoming. Though still dominated by founding families, their decisions to issue shares have required more transparency.

Deposits at Sarasin rose just 416 million Swiss francs last year, a mere 1.3% of the 30 billion francs under management. At Julius Baer, a relative upstart tracing its roots back only to 1890, clients actually withdrew 800 million francs, on balance. Nearby Vontobel attracted a net 200 million francs.

"It is difficult to generate new money in Switzerland," said Herbert Scheidt, Vontobel's chief executive.

Even UBS and Credit Suisse Group, the giants of Swiss banking, are struggling at home.

The reasons the flood of foreign money has turned into a trickle lie in tougher controls at the banks and changed attitudes among customers.

New laws on money laundering have eliminated Switzerland's former attractions as a destination for illicit, or just undeclared, money.

Declining personal tax rates in Europe have also reduced the fiscal incentives for stashing money in Swiss accounts. Italy, Belgium, France and Germany have even introduced amnesties to entice wealthy citizens to repatriate funds.

Holding money in Switzerland will become even less appealing after a savings tax on some assets takes effect in July.

Clients, meanwhile, have developed different priorities from the days when asset preservation sufficed. Portfolio performance has gained importance, as has cost consciousness. And not every private bank has delivered.