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If ever there was a challenging time to lead a Swiss
bank, it is now. Nicholas Moody speaks to
Yves Mirabaud about combating the cross-border blitz on secrecy,
its innovative approach to serving Asian clients and the evolving
post-crisis demands on Swiss private banks.
Yves Mirabaud, like many other Swiss banking bosses, knows
that the next four to five years are going to be tough.
Currently managing partner and a
member of the executive committee at Mirabaud, he is to take over
as senior partner from Thierry Fauchier-Magnan from 31
December.
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By GlobalDataMirabaud describes the new position
as more of an evolutionary than a revolutionary role. He is keenly
aware of the changing business environment and the tremendous
challenges facing the industry, particularly in Switzerland.
At the top of Mirabaud’s list is
protecting client confidentiality, a thorny issue outside
Switzerland’s borders, but crucial inside.
“Even if bank secrecy does not
cover tax matters as much as it did before, it is still very
important to offer the confidentiality and protection of the
private sphere of our clients for many other reasons,” he says.
Fighting regulators on two
fronts
Mirabaud, who
recently finished his one-year term as chairman of the Geneva
Private Banker’s Association, is fully aware that the battle to
protect client confidentiality remains a war on two-fronts.
The Swiss industry is grappling
with regulators internationally – dealing with regulations
including Foreign Account Tax Compliance Act (FATCA) and the
criminalisation of tax evasion from the Financial Action Task
Force, and domestically – with European regulators (chiefly Germany
and the UK).
Just as with his new job title,
Mirabaud describes the discussions with regulators and the cascade
of impending laws as an evolution towards increased transparency
that it must deal with.
“FATCA will be world wide and we
hope that there will be an international reaction in order to make
this decision applicable at a reasonable level, which doesn’t seem
to be the case today,” he says.
He may be heartened by news that
the Internal Revenue Service will delay the phase in of FATCA,
pushing implementation out from January 2013 to January 2014.
Despite this reprieve, the industry
is working hard on the home front, through the Swiss Bankers
Association, to find a solution to the ongoing wrangles over tax
information with countries, including Germany and the UK.
Mirabaud says the four objectives
of its discussions have been:
- Find a settlement for the
past - Be tax compliant for the
future - Keep the privacy of
clients - Gain access for Swiss banks
to European markets, allowing Swiss banks to have access to onshore
clients in other markets with a custodial bank in
Switzerland
The three first objectives are in
order to reach an equivalent to the automatic exchange of
information.
Safeguarding
secrecy
Client
confidentiality is at the heart of the discussions. Mirabaud sees
the difference between secrecy and confidentiality meaning there is
some exchange of information on a very limited basis.
“The idea is to try to find a
solution [with other countries] that is an equivalent to the
automatic exchange of information by preserving the private sphere
and confidentiality of our clients,” he says
“We believe we are proposing a more
efficient system than automatic information exchange.
“Switzerland had to change its tax
information procedures and it agreed to exchange information on
request of specific cases. What we are absolutely opposed to in
Switzerland is this type of Big Brother, automatic exchange of
information, which does not preserve your privacy.”
“We agree that people have to pay
their taxes and we are ready to find systems to allow certain
countries to do that – this is all the discussions we have had with
Germany and the UK.”
“What we do not agree is to destroy
this privacy and to have this type of list circulating with
automatic exchange of information,” Mirabaud says.
Profits eaten up by strong
CHF
Alongside regulatory challenges,
managing the costs of running a Swiss private bank in Switzerland
continue to occupy Mirabaud’s mind.
Although the company has won more
mandates to manage new assets, these gains have been eaten away by
the high cost of the Swiss currency – a common sentiment among
Swiss banking bosses.
“The strength of the Swiss franc is
a very difficult factor to manage,” he says.
“Because we are an export industry
and we still own a lot of assets that are not denominated in Swiss
francs as most of our costs are in CHF, so this is, for the time
being, an important challenge for the whole industry that we have
to work with and adapt to.
“It is not a very new situation,
because the CHF has always been strong [But] the currency movement
in the past 12 months has accelerated,” he adds.
Innvoation in serving Asian
clients
Challenges abound, but so too do
opportunities, albeit in markets outside Switzerland. Mirabaud is
expanding its operations in the Middle East and pushing its asset
management capabilities.
Unlike the
bulk of its Swiss rivals, including Julius Baer, Sarasin, Pictet
and Lombard Odier, Mirabaud has made a strategic choice not to
establish a bank in the one private banking market on every
banker’s lips: Asia.
“We have decided that we are not
ready to have a bank in either Hong Kong or Singapore because we
feel the competition is huge, the procedure to get a licence is
very complicated and the costs are high,” says Mirabaud.
“The type of services required by
Asian clients [i.e. financing commercial activity] is something we
do not offer.”
Middle Eastern
expansion
Yet this does not mean the bank has
left Asia untouched. The challenges of establishing an onshore
Asian presence has led Mirabaud to explore an innovative approach
to servicing Asian clients, based around its expanding Middle
Eastern business.
In 2010, it upgraded its banking
licence in Dubai to allow it to offer custody, portfolio management
and corporate finance services.
The upgrade means it can offer a
booking facility in Dubai. Portfolios can also be managed from
Dubai but booked in Geneva or Singapore to clients throughout the
Indian subcontinent, and the MENA region.
Its inventive agreement with
different banks, Bank of Singapore (BoS) being one of them, means
it can still service clients who want a base in the city state,
despite not having a physical presence in Singapore.
The arrangement allows Mirabaud
clients in Singapore to book assets though a local bank but have it
managed from its Dubai base.
“It is a very different model from
most of our competitors,” he says.
“We send clients to them because
they want to book in Singapore so we have an agreement with BoS but
we manage and advise their assets.”
Mirabaud now has 15 staff in its
new Dubai offices in the Dubai International Financial Centre to
serve what it sees as a newly-emboldened region, led by former
Julius Baer boss Ludovic Pernot. The bank expects to reach $1bn
assets under management (AuM) from Dubai by the end of the
year.
Offering an
alternative
One part of the Swiss bank’s
business that is not small, and Mirabaud is keen to develop
globally, is asset management.
The asset management business,
worth CHF10bn ($12bn), makes up about two-fifths of AuM.
But, increasingly, Mirabaud wants
to offer its alternative investment products, equivalent to CHF5bn
AuM, to a wider audience.
To help this build-out, Mirabaud
bought a 30% stake in investment adviser Prosper in December last
year.
Founded by Riccardo Barilla and
Thierry Robin, former chief executive and head of sales of the
Oyster fund range, the new fund is geared towards professional and
private clients.
The two institutions agreed to
jointly manage a €134bn ($192bn) multi-manager Undertakings for
Collective Investment in Transferable Securities fund in
Luxembourg.
“We are quite strong in the UK for
asset management for institutional clients, we are also relatively
present in Switzerland but we want to expand that,” says
Mirabaud.
Selling products beyond
Mirabaud
How is Mirabaud going to
differentiate itself in the highly-competitive alternative
investments space?
“Obviously we are not going to
create indexed products, we are not going to manage huge bond
portfolios at two basis-point margins,” he says.
“We believe with the hedge fund
capability we have, with products, mainly linked to equity, we can
add value.”
To do this, Mirabaud has built
capability over the past two years, hiring operational risk
managers, analysts, products specialists, and sourced hedge fund
managers.
“We have approximately 20-25% of
assets managed through alternative investments,” he adds.
“Even if we have used most of this product for our private
internal clients, we could be more active in selling those
expertise and products externally,” he concludes.
