Will the Swiss financial center lose its top position?

 

We are number one. To date, banks in no other country in the world manage more money from foreign customers than in Switzerland. More than in Great Britain, the USA, but also Hong Kong and Singapore.

Switzerland’s leading position in cross-border asset management is symbolic and contributes to the financial center’s self-image. But it is at risk – if not already lost. This is the conclusion of a new study by the consulting firm Deloitte. “Our results clearly show that Switzerland is losing ground compared to other financial centers,” says the International Wealth Management Center Ranking 2024.

Switzerland and Great Britain are separated by 8 billion dollars

Assets are considered offshore if they are managed outside the owner’s country of residence. Last year, 2,174 billion dollars of such assets were held by Swiss banks and asset managers. This is a top value, but according to Deloitte the gap to the second-placed offshore financial center Great Britain, at eight billion dollars, has become vanishingly small.

Deloitte believes that Switzerland could soon lose its position as a leading international asset management center if “banks, asset managers, regulators and the National Bank do not actively address the challenges facing the financial center”.

These are dramatic words. The fear of Switzerland’s decline as a leading offshore financial center is now decades old. The experts at Deloitte had already noted in previous years that the local financial center could soon be overtaken by one of the competing locations – and it didn’t come to that.

The causes

But the feared relative loss of Switzerland’s importance in cross-border asset management is not a given. The paper identifies several factors that have had a negative impact since the last study was published in 2021.

Looking to the future, Deloitte advises the Swiss authorities to be pragmatic in order to maintain the high competitiveness of the financial center. The Federal Council is likely to propose stricter rules for the banking center in the first quarter of 2025 in response to the CS crisis. Deloitte advocates not “overburdening” the asset management industry with new rules.

The entire offshore business is stagnating

Ultimately, the business with offshore assets is under pressure not only in Switzerland but internationally. Total cross-border assets under management have stagnated at around $10,000 billion over the past decade, while total financial assets have increased significantly.

This is due to the increasingly strict rules that banks have to comply with if they want to manage assets of foreign customers across borders. But also because of the ever-improving local offerings for asset management.

But you can also see it all more calmly. Andreas Venditti, banking analyst at Vontobel, says he has been hearing for many years that Switzerland could soon lose its top spot in cross-border asset management. If the time has come now, then the surprise would be that it took so long.