Foreign Clients Move Rs 25 Lakh Crore Away From Swiss Banks: Report

Zurich/New Delhi: As India steps up its pressure on Switzerland in its black money pursuit, foreign client funds worth 350 billion Swiss francs (nearly Rs 25 lakh crore) have left Swiss banks in the past six years.

While there are no specific data for money that could be of Indians, this includes outflows to the tune of 100 billion Swiss francs that are related to fine payments in the context of declaration of untaxed money, as per a study by PwC.

The study, conducted by the Swiss unit of global consultancy giant PriceWaterhouseCoopers, has analysed annual reports of 90 private banking institutions in Switzerland, as also the other public data including that of Swiss central banking authority SNB.

"We estimate that around 350 billion Swiss francs in net assets under management from foreign-domiciled private clients have left Switzerland in the last six years," PwC said.

"Overall, we estimate that up to 100 billion Swiss francs net new money outflows are related to fine payments in the context of the declaration of untaxed money," it added.

This leaves outflows to the tune of 250 billion Swiss francs from accounts of clients that have ultimately terminated their relationship with banks in Switzerland and transferred their money back to their home countries or to another financial centre, the study found.

Switzerland has been facing intense pressure from various countries, including India, in the recent years amid a global crackdown on the famed secrecy walls of Swiss banks, which are perceived to have made them safe haven for black money.

The Alpine nation has been forced to revise its tax treaties with India and many other jurisdictions to enhance its information exchange framework, resulting in a major outflow of client money from Swiss banks.

As per the latest data from Swiss National Bank (SNB), foreign clients' money in Swiss banks declined to a record low of 1.32 trillion Swiss francs (over Rs 90 lakh crore) during 2013. However, Indian clients' money in Swiss banks rose by over 40 per cent during the year to nearly Rs 14,000 crore after declining for the past few years.

The quantum of Indian funds in Swiss banks stood at a record high level of 6.5 billion Swiss francs at the end of 2006, but it declined by more than 4 billion Swiss francs after four straight years of fall till 2010.

SNB's official figures, however, does not include the money that Indians or others might have in Swiss banks in the names of entities from different countries.

India has also constituted a Special Investigation Team (SIT) to probe cases of alleged black money of Indians, including funds stashed abroad in places like Switzerland.

As per the PwC study, "the tax assessment of cross-border clients that resulted from the international demand for more tax transparency certainly accounts for a large part of the net new money outflows (worth 350 billion Swiss francs)".

"However, net new money outflows in association with the settlement of the tax situation are not that serious for a bank since it is quite possible that concerned clients remain clients of the bank."

"Moreover, this is a one-time effect and could even have a positive impact in the future. This is because, following the settlement of the tax situation, some cross-border clients will bring their money back to Switzerland, as it will then be possible to use it without any restriction," PwC said.

The consultancy said that the Swiss private banking has faced enormous challenges since 2008, but "the banks will be able to attract net new money if they succeed in bringing regularised assets back to Switzerland by emphasising their high-quality service and strong performance".

"After all, clients with tax-compliant assets are much more demanding than clients with untaxed assets. And if Swiss politicians pull the banks out of the international crossfire and manage to create unfettered access to the EU market, Swiss private banking will once again generate positive headlines."