The Demise of Swiss Private Banking is Premature
Future of private bankers under the microscope ... With the demise of Wegelin and planned ownership changes at Pictet and Lombard Odier, the number of traditional, family-run private bankers in Switzerland is shrinking from a Second World War rate of around 60 to just nine. The world of private banking faces an evolving landscape. The rate of new wealth creation in emerging economies eclipses that of Europe, volatile markets offer less returns and the global crusade against tax evasion has eroded banking secrecy. Many observers fear that the rarified atmosphere of the small, discreet family boutique in Switzerland has become too noxious for the breed to survive. – Swissinfo
Dominant Social Theme: Private banking, who needs it?
Free-Market Analysis: The world's top elite families have stored their gold in Switzerland for a long time, hundreds of years. And during that time, Swiss private bankers have served this vast Money Power with discretion and courtesy.
Swiss private banking is not going away, no matter what anyone thinks, or in this case (see above) prognosticates. We wrote an article yesterday about the technocratic bent of Switzerland's largest banks – and how it constituted a disturbing trend. But that is probably the exception that proves the rule.
Those banks represent what is wrong with Swiss banking. But Swiss private banking has long proven that it has a better – and more marketable – set of services. Services that have proven exceptionally compelling in this age of government overreach.
What happened, so far as we can tell, is that too many of the hoi polloi started using the Swiss model of bank secrecy and efficient service. And thus, a shakeout was propounded. What is appropriate for top elites is not for you.
Two firms were invented ... UBS and Credit Suisse. These firms, contrary to the tenets of private banking, expanded around the world and applied Swiss banking practices not just in Switzerland but throughout the West.
They pointed a metaphorical gun at private Swiss banking generally because it was inevitable that Swiss secrecy would contravene Western tax collection. And that is just what happened. The trigger was pulled. Swiss banking was wounded.
UBS in particular was too big to fail, however. Rather than shut down UBS, the Swiss government negotiated. And continued to negotiate. And UBS negotiated, too, and Swiss banking confidentiality was broached.
Which was the plan all along?
The elites like their secrecy – but for themselves. They'll keep their secrecy. The rest of us ... well, we're less secure. The privileges of top money have been reclaimed. Money Power remains inviolable and above the law. It's their country, not yours.
Drive through Switzerland. It is like a Hollywood stage set, so near and clean – and wealthy ... This is a country created and supported by Money Power. Here's more from the article, excerpted above.
There are no ostentatious displays of wealth at Switzerland oldest private bankers, Rahn & Bodmer. Clients do not wade through plush carpets under the gaze of gilded oil portraits when they enter the Zurich premises. Instead, the bank exudes an aura of calm, understated efficiency that conceals the drama and volatility of the 263 years of history that the family firm - and generations of its clients - has lived through.
One of the bank's most successful calling cards is that its five partners accept unlimited personal liability for losses. This is a condition for earning the title of "private banker" (as opposed to private bank) in Switzerland – a distinction so valuable that the term was copyrighted by the Swiss Private Bankers Association (SPBA) in 1997.
"Clients appreciate that the partners will take the upmost care to ensure that the business model can bring no possible harm to the bank," Christian Rahn told swissinfo.ch. "This leads to a more risk adverse, conservative strategy than other banks."
Until last year, Rahn & Bodmer was Switzerland's second oldest private banker. That all changed when the previous record holder, Wegelin, fell victim to modern times - savaged into oblivion by United States lawyers for helping clients evade taxes.
While the rump of Wegelin will still exist until the legal process has been completed, the once proud St Gallen business - founded in 1741 - has ceased to function as a bank.
The fate of Wegelin's partners - who could lose their shirts in US fines – might have prompted two other Swiss private banking heavyweights - Pictet and Lombard Odier – to turn their backs on the unlimited liability private banker model, according to many observers.
This is the issue, then, for Swiss private banking – how to adapt to the times. Wegelin was sacrificed. Bad luck. Closely held family businesses may seek different structures to avoid liability. And some of these new structures may compromise the fundamentals of private Swiss banking.
But there is need for private banking. The really big money needs it – and Money Power may bank in the Americas and in Asia, too, but Switzerland will remain. No one knows for sure how much of the world's wealth is deposited in Switzerland in gold, silver and currency but it is a huge chunk. That's Money Power money. Trillions and trillions.
It's not going anywhere and neither is Swiss private banking. The top elites are just making it more difficult for others to have the same access and services they do.
Don't write off the Swiss – or their banking. It's a powerful and compelling business that's been around a long time.
Conclusion: It may change but it's not going away.
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Posted by mava on 02/23/13 10:38 AM
Whatever remain of swiss banking, may well be called "private banking", why not? Call it what you wish.
Will there be swiss banking in the future, meaning the only real banking, where no one has an access to one's account but the account owner?
Big, resounding "NO". Forget about it. From now on, there will be no more banking. Monster states like the US, will be able to see what is in your account, and grab what they want from it, on a whim. And surrendered swiss will deliver you from your "safe" vault to the site of the beheading designated by the big dog.
Reason? Money. You can't have a business without a demand. As more and more people got more and more stupid, the demand for real banking was waning. A swiss banker sees that he can make more money by having a trap-style fiat bank, than by running a real private bank. This will reverse, probably. When? Not on mine lifespan or that of anyone alive today.
As far as I am concerned, the swiss can KMA. They have successfully removed the whole reason for banking with them - to be protected from an aggression by my fascist state. Any other benefit can be and is better delivered by someone else.
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Posted by terry on 02/23/13 08:03 AM
While not necessarily a recognition of a pattern - it is interesting to cross reference two articles posted here at the DB: the above, and Ron Holland's last posting where he mentions Canada's confederation as a balancing between the powers of the province and the federal overseers (try navigating this mess if you're a citizen, though.
From the outside looking in it may look good - but from our perspective inside the box, once you have to deal with a government bureaucrat or office [a permit, meaning a petty tyrant's permission, is required to do virtually anything before acting {so much for freedom}]) - well, the best way to express it would be: Can anyone spell "patience is an impossible virtue in Kanata?"
But more interesting was Ron's mention of the Swiss system with their so-called "direct-style" of democracy. In my humble opinion, the power the individual Swiss-free holds is their willingness to involve themselves in referendums - on everything! That is where the deciding say on an issue is determined. While not a perfect way that makes happy of all, no doubt, it still has power as a decent compromiser. And no doubt they have large voter turnouts).
It is odd (or is it) that deep in the ground within this "best democracy the world has to offer" - that the centuries old money elite hold their gold. A facade of the best of us that facades the worst, it seems to me. I believe it is generally acknowledged the world over that a great amount of plunder representing an awful of bloodshed is represented in those vaults - and if that is not symbolic of the money elite and their sense of morality or lack thereof - nothing is.
It would be wise, methinks, to go to anything but a gold standard. The ugly ones hold way too much of it and are buying more with the digital fiat being printed in surreal amounts.
So, what standard would I suggest here in Kanata? Well, I could say wheat, natural gas, tarry sands, diamonds, graphite, water - any number of commodities, I suppose. But we not so Can-free, and are so over burdened with regulatory capture, a fixed resource-backed anything would not solve a thing. Certainly not until a re-wind of that capture is implemented.
(Could our confederation of provinces be the chink in the chain power?).
At any rate, free-market money seems the best suggestion. Let the market decide the backing. (The old elites know how much we are dogging them with that suggestion. It is making them, no doubt, piddle in their Depends. They've already begun to scoot for easier pickings. But those so-called easier pickings know the old boys and their out-moded strategies, too. Too bad for them, I say. Should have used the multi-leveled, vertical-thinking, pattern-recognizing computer much more than the dusty old, linear-thinking books of secret-society narratives they are stubbornly holding on to with their wrinkly old sorcerer-hands - some majick, you old coots).
Long live The Internet Reformation - our electric brain and long-memory is at work - 24 hours a day, seven days a week!
And the results of that non-rest is compounding.
The Canadian Curator.
