That impact may double should Switzerland agree to similar accords with other European countries, the study continues.

Recently, Switzerland signed tax accords with Germany and the UK, which end disputes over tax evasion by wealthy Germans and Britons with cross-border accounts. As per the deal, revenue generated from the tax on investment and capital gains will go to the German and UK treasuries while client identities will remain secret.

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Swiss banks may also lose about CHF1.1 billion in annual revenue, or about 4% of the 2010 total, says the study. Swiss private banks may lose another CHF500 million in revenue as customers demand fees closer to those charged for onshore accounts.

Booz & Co estimates that offshore assets under management by the Swiss financial sector totaled around CHF2.05 trillion at the end of 2010.

The report predicts that Switzerland’s private banking industry will shrink but will also benefit from the stability afforded by the two agreements.

It remains unclear for now if the treaties will be upheld in their current form as the EU has raised objections over the deals, the treaties have already dented the reputation of Switzerland as a safe off-shore haven. The problems would deepen further for Swiss private banks should similar agreements be struck with France and Italy.

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Swiss private banking firms, which are already reeling under pressure due to dwindling margins and rising costs, can ill afford continued mass exodus of capital. It will further weaken their position in international market and make them less viable economically.

WealthInsight believes it highly possible that Swiss private banks will accelerate the pace of consolidation to cope with this challenging business environment.

The consolidation has already started in Swiss private banking industry and the latest example being the deal in which the Brazilian-Swiss private bank Safra Group agreed to acquire controlling stake in Bank Sarasin for CHF1.04 billion from Dutch lender Rabobank.