A.M. Best Special Report: Taxing Times for the Private Banking Industry

LONDON–(BUSINESS WIRE)– Having weathered the credit crunch with relative ease, the offshore private banking industry has recently met a very different set of obstacles as a global crackdown on tax evasion has led to heavy pressure being exerted on so called “tax havens.” A.M. Best Co. has therefore assessed what short- or long-term damage may have been done to the creditworthiness of the private banking institutions (PBIs) domiciled in offshore financial centres (OFCs). This report concentrates on four key European jurisdictions: Switzerland, Liechtenstein, Andorra and San Marino.

• To varying degrees of severity, the new wave of international pressure has generated net new money outflows at a number of institutions.
• The outflow of assets poses the risks of liquidity shortages in the short term and erosion of profitability in the longer term, and each of these risks carries the further risk of reputational damage.
• The jurisdictions considered in this report have shown varying levels of sensitivity to pressures, and A.M. Best has material concerns regarding San Marino’s banking industry.
• The experience of individual PBIs also has varied considerably. A.M. Best believes the offshore private banking business model has suffered material, long-term damage, but this model remains sustainable. Institutions with stronger brands and franchises remain well placed for growth, whilst for others, the longer-term credit profile may have been damaged by the strain on earnings.

• A.M. Best considers an increase in onshore expansion and heightened merger and acquisition activity as highly likely.

To download a PDF copy of all banking special reports at no cost and to access data, analytical methodologies and news on the U.S. banking industry, please visit www.ambest.com/banks.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

A.M. Best Co.
Analyst:
Dean Portelli, +(44) 20 7626 6264
dean.portelli@ambest.com
or
Public Relations:
Jim Peavy, +(1) 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
rachelle.morrow@ambest.com

Source: A.M. Best Co.