Russian wealth is hidden in many places. But the crackdown is especially damaging to Switzerland, the world’s largest offshore wealth center. Russians hold between 150 billion and 200 billion Swiss francs (146 billion-195 billion euros) in the country’s financial institutions, according to the Swiss Bankers Association. This figure is potentially almost half of the global investable wealth of Russian plutocrats, which the Boston Consulting Group puts at $500 billion (E453 billion).
Admittedly, the figure is just over 2% of the 8.7 trillion Swiss francs (E8.5 trillion) that banks oversaw in 2021. But the proportion doubles if domestic assets are excluded. UBS, Credit Suisse and Julius Baer collectively hold more than $100 billion (E91 billion) of Russian money worldwide, we estimate.
Wealth managers used to view high-end Russian clients as especially lucrative because of their tendency to engage in exotic and expensive transactions. These included using mega-yachts and private jets as collateral for loans, allowing bankers to charge gross spreads of up to 700 basis points, compared with less than 100 basis points for so-called Lombard loans or portfolio-backed mortgages, according to industry estimates.
Those days are over. The European Union has frozen the assets of billionaires Mikhail Fridman, Petr Aven and nearly 900 other tycoons and politicians, which Bern is also implementing. Rapidly evolving regulations mean that wealth managers view all Russian clients as potentially subject to restrictions, bankers and industry sources say.
As a result, bankers are reluctant to allow Russian clients to transfer ownership of securities or move money elsewhere. They are also pressuring clients to repay outstanding loans quickly, further straining relations. This can put a dent in wealth managers’ revenues. Meanwhile, mindful of hefty fines imposed by the U.S. for violating sanctions, private banks are incurring additional costs by scrutinizing individual accounts to ensure they have no ties to blacklisted individuals or companies. “We have people working on this 24 hours a day,” says a banking source.
Eventually, wealthy Russians who can move their money could flee to other centers such as the United Arab Emirates. For now, however, private banks in Switzerland and elsewhere will have to carry the excess financial baggage.
The authors are columnists for Reuters Breakingviews. The opinions are their own. The translation, by Carlos Gómez Abajo, is the responsibility of CincoDías.
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