Strong franc will add pressure on Swiss banks: association
Bern (Switzerland) (AFP) - The strengthening of the Swiss franc will heap pressure and hit the profitability of the country's private banks that specialise in wealth management, the head of their association said Tuesday.
The Swiss central bank stunned the world Thursday by abandoning a three-year bid to hold down the value of the Swiss franc, scrapping the minimum rate of 1.20 francs against the euro.
The value of the franc has since soared, and was on Tuesday trading around parity with the euro.
The chairman of the Association of Swiss Asset and Wealth Management Banks, Boris Collardi, said the strong franc could pose a problem for private banks that earn large chunks of their revenues in foreign currencies.
Swiss banks earn up to 80 percent of their revenues in foreign currency but about 80 percent of running costs are in Swiss francs.
"Therefore this will directly affect the profitability of Swiss institutions," said Collardi, who is also chief executive of Julius Baer.
Collardi said some banks would now face higher cost-income ratios and could feel the heat to merge, sell or even fold up.
"That could lead to the consolidation of private banks," said Collardi.
Between 2005 and 2013, the number of private banks in Switzerland dropped by almost a fourth from 182 to 139 due to increasing regulatory costs and an erosion of banking secrecy following pressure from overseas authorities and regulators.
