Executives at several of Switzerland’s largest banks say wealthy Chinese clients are increasingly worried about keeping their money in the country because of the toughness of sanctions imposed since Russia’s invasion of Ukraine.
“We are not only surprised but shocked that Switzerland has given up its neutrality,” said a director who heads Asian operations at his bank. “I have statistical evidence that literally hundreds of clients who wished to open accounts are now without them.”
Despite the flurry of Chinese companies flocking to Swiss IPOs, the Financial Times interviewed senior bankers at six of the 10 largest Swiss banks about their experiences dealing with private clients, and they all told similar stories. Many said they feared a chilling effect on lucrative lines of business and an important source of future growth.
“Clients have raised the issue of sanctions,” said one banker. “At the end of last year, it was definitely a topic of concern for clients. They asked if their money was safe with us.”
RBC analyst Anke Reingen highlighted the risks facing the Swiss banking sector, which accounts for 10 percent of the country’s gross domestic product.
“Asia has been a significant contributor to the profitability of Swiss banks,” she said. “If you look at their share prices, you can see that they are very highly correlated with Asian indices because a large part of earnings come from the region and historically, a large part of earnings growth from wealth management.”
Some Swiss banks say they are already “rehearsing” how to deal with the consequences of a significant deterioration in international relations with China and how to protect and reassure their biggest Chinese clients.
Andreas Venditti, an analyst at Vontobel who studies the banking sector, said all Swiss wealth managers must weigh the impact of the country’s sanctions. “It’s an important topic on the agenda for boards and executives,” he said. “They’re all trying to prepare for what comes next.”
Since Russia’s invasion of Ukraine last year, the Swiss government has been in lockstep with the European Union in imposing sanctions on Russia and wealthy Russians with close ties to Putin.
In recent weeks, several incidents have drawn closer to the possibility of sanctions against China, including a spy balloon dispute and possible arms supplies from Beijing to Moscow.
A U.S. diplomat based in Bern said officials in his office are “keeping a close eye” on China’s wealth in Switzerland.
A bank executive interviewed by the Financial Times said he thought Switzerland was moving too fast on its Russian clients. “Somewhere along the line, we have to draw the line at what [Switzerland] will and will not engage in.”
The government insists the country’s neutrality remains sacrosanct, but says sanctions against Russia involve weighing the “credibility of Swiss neutrality” against the severity of Russia’s “violations of fundamental norms of international law.
Nevertheless, Foreign Minister Ignazio Cassis has debated the meaning of neutrality at home and has publicly advocated a more “cooperative” approach with like-minded partners.
Switzerland remains the world’s top offshore wealth center, accounting for a quarter of the global total.
According to the Swiss State Secretariat for Economic Affairs, some 7.5 billion Swiss francs ($8 billion) in Russian funds are currently frozen as a result of Swiss sanctions – a fraction of the 46.1 billion Swiss francs in Russian assets held by some 7,500 wealthy Russians settled in the country.
However, Asia has become an even more important source of income in the last decade.
The Swiss government does not disclose the size of Chinese assets in the country, but a document released to the International Consortium of Investigative Journalists in 2014 showed that Swiss banks opened accounts for many of China’s ruling elite and their children, including son former premier Wen Jiabao.
Swiss bankers say most of their Chinese clients do not fit that profile. One said that in his experience, most were successful small-scale entrepreneurs with wealth between 10 million and 50 million Swiss francs.
Removing such people from Swiss banks would be a major blow to the industry, he says.
But another veteran of the wealth management industry sounds more optimistic. “I have talked to Chinese clients who were wary of sanctions against Switzerland last year, but they haven’t stayed away.
“Trade between the US and China was $700 billion last year – that’s not going to change any time soon.”
