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Monday, February 4, 2013

Swiss banks lure clients with gold accounts, cash vaults

Geneva: Swiss banks are selling a new safe-haven idea to the rich and mighty from India and other countries -- special accounts for holding gold bars and high-value Swiss franc notes in the safety of their cash vaults.

Amid a global crackdown against alleged illicit wealth in secret accounts of Swiss banks, these new products claim to offer safety from the snooping eyes of regulators and tax authorities from the home countries of the rich foreign clients of banks operating from Switzerland.

Speaking on the condition of anonymity, several Swiss bankers present at the recently held World Economic Forum (WEF) annual meeting in Davos said these gold accounts and cash vaults are being lapped up by the rich clients from across the world, including those from India.

As a result, some of the large banks have already hiked the fees for these gold accounts and the safe deposit boxes, which are also being used to store valuables like gold, diamond, paintings and other art works, a top Swiss banker said.

The bankers claimed that these safe deposit vaults are being lapped up because of limited risk of catching the prying eyes of the foreign governments having signed banking information exchange treaties with Switzerland.

None of the banks were ready to offer official comments on this trend, despite repeated attempts, although their officials admitted that they have successfully approached with these products many of their rich clients, including during the WEF summit.

The bankers said they are telling their rich clients that Switzerland's tax and information exchange treaties with India and other countries are mostly limited to funds in the customers' savings, deposit and investment accounts, and do not apply to the safe deposit boxes.

As a result, the demand has soared to record high levels for the safe deposit boxes and the 1,000 Swiss franc banknotes in Switzerland, as rich of the world are rushing to get them. As per the data available with Switzerland's central bank SNB (Swiss National Bank), the thousand-franc notes now account for 61 per cent of total value of all Swiss banknotes in circulation, up from about 50 per cent in 2011.

Just one thousand-franc banknote is worth about R
 60,000, making it easier to store large amount of money in form of these notes. The total value of thousand-franc notes currently in circulation is over R
two trillion (35 billion Swiss francs). Also, Switzerland is among the few major countries to have denomination of as high as 1,000, while the highest value banknotes in the UK and the US are only 50 pounds (about R
 4,300) and 100 dollars (R
 5,500), respectively.

Amid allegations of Indians stashing huge amounts of illicit wealth abroad, including in Swiss banks, the Indian government last year said it is making various efforts to bring back the unaccounted money.

As the global pressure mounts on Switzerland to give access to their banking account details, the demand is growing for thousand-franc notes as these high-value currency bills make it easier to store large amount of cash.

A rush had begun last year for the safe deposit vaults at Swiss banks, after which many banks have increased their capacity for these boxes and are now charging higher fees from their rich clients availing these services. While there are no official figures for these boxes, the commission and fees earned by banks for such facilities appear to be rising.

Swiss banks have registered a decline in their overall commission earnings, as also in their commission income from core banking operations, in the recent quarters, but their 'other commissions', which includes royalty and rental fees for safe deposit boxes, are rising sharply.

While Indians are alleged to have stashed billions of dollars worth black money in Swiss banks, the official SNB data puts the funds of Indian clients in Switzerland's banks at a modest 2.18 billion Swiss francs (R
 12,700 crore) -- which is just 0.14 per cent of total foreign wealth there, as on December 31, 2011.



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