UBS expects Swiss banks to see European clients withdraw “hundreds of billions of francs” as a result of steps to stop foreigners using secret accounts to evade taxes, warned Juerg Zeltner, head of UBS wealth management.
Zeltner reiterated an estimate he gave in May that Switzerland's biggest bank could see outflows of 12 billion to 30 billion Swiss francs (12.8bn to 31.9bn) from total European assets under management of over 300 billion.
“As a consequence of the realignment of the financial centre and the planned withholding tax, we assume that a total of hundreds of billions of francs will flow out of Switzerland” he told the Schweizer Bank magazine in an interview.
“In the offshore business with European customers, I assume that we will have to live with significant outflows of wealth for quite a long time yet,” Zeltner said.
German financial services consultancy Zeb/Rolfes Schierenbeck Associates estimates Swiss banks could see European clients pull up to 200 billion francs by 2016 of the 789 billion it believes they currently hold in untaxed assets.
Zeltner's comments come just days after Credit Suisse, Switzerland's second biggest bank, said it expected clients in Western Europe to withdraw up to 37bn in the next few years due to pressure on the tax issue.
Putting the potential outflows in context, Zeltner said UBS had seen about 200 billion francs of withdrawals during the financial crisis, when the bank had to be rescued by a government bailout after huge sub-prime losses. Client assets fell almost double that amount due to market and currency moves.
Swiss bank secrecy which has helped the country build a 2 trillion dollars offshore financial centre dominated by UBS and Credit Suisse has come under heavy fire in recent years as cash-strapped governments elsewhere have sought to fight tax evasion.
Switzerland has struck deals with Germany, Britain and Austria to tax their citizens' accounts and is hoping for accords with Italy and Greece. But the deal with Germany the biggest market in Europe is under threat from the opposition Social Democrats who see it as too lenient on tax evaders.
Zeltner said he hoped the dispute with Germany would be settled, adding that he still saw a good future for the bank's business in the country and elsewhere in Europe even after Swiss banks lost their tax evasion appeal.
“There are legitimate reasons to have money outside your home, for example due to the high level of training in Switzerland or currency and political stability,” he said.
“In particular in the area of very wealthy customers, there is strong demand for diversification of booking centers for assets. That will also be the case in the future,” he said.