Swiss banks turn pessimistic about UK & German tax agreements

16 January 2012

Most Swiss banks now believe Switzerland’s new withholding tax deals with Germany and the UK will harm the country’s banking sector, according to a survey by Ernst & Young.

The accountancy firm’s Bank Barometer 2012 shows that the optimism seen last year about current developments in banking secrecy, withholding tax and tax transparency has now evaporated.

Of the 120 banks surveyed by E&Y, only eighteen regard their current business development as positive. Nearly thirty banks admitted their prospects were negative. By comparison, last year just over half of all Swiss banks were upbeat about their prospects.

Private and foreign-owned banks were the least confident about the future, as they face heavy competition, tougher regulation and the prospect of having to change their business model to cope with the dilution of banking secrecy. Some 54 per cent of banks consider tax treaties and tax transparency will have a “negative or somewhat negative” impact on Swiss banking – whereas a year ago 73 per cent thought they would help the country’s banking industry.

E&Y’s financial services partner Hans-Joachim Jaeger said this was due to continuing uncertainty as to the exact content of the UK and German treaties, and the extra costs of implementing them.

As well as keeping up with growing regulatory requirements, banks expect to face greater challenges in managing interest rates and credit risks in the new fiscal year.

On the brighter side, few Swiss banks anticipate a dangerous outflow of assets under management, and most still believe the future holds good prospects. Eighty-five of the 120 surveyed banks assume that business will develop “positively or somewhat positively” this year.

E&Y’s Banking & Capital Markets chief Iqbal Khan said banks were probably now being more realistic, compared to their excessive optimism of a year ago. “Euphoria has given way to reality”, he said.



Ernst & Young (Summary)

Ernst & Young (full report, PDF)

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