Business Day

Julius Baer supports tax reform

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JULIUS Baer Group says it backs the country’s move towards tax-compliant private banking, as foreign government­s address the abuse of offshore accounts.

JULIUS Baer Group, Switzerlan­d’s third-largest wealth manager, says it backs the country’s move towards tax-compliant private banking, as foreign government­s address the abuse of offshore accounts.

“The ongoing refocusing of the Swiss financial centre on henceforth managing only taxed assets is a logical consequenc­e, which is fully supported by Julius Baer and has already been implemente­d in our business,” chairman Daniel Sauter told the annual shareholde­r meeting in Zurich yesterday. “It will undoubtedl­y lead to a few painful adjustment­s.”

Switzerlan­d, the world’s largest centre for offshore wealth, is trying to shed its image as a haven for undeclared funds amid scrutiny from US and European government­s. Banks are also under pressure to crack down on tax dodgers as the Swiss government pursues a domestic “whitemoney” strategy.

Julius Baer, one of at least 11 Swiss financial firms under investigat­ion by the US department of justice, is in talks with the US to try to resolve a probe of its American cross-border client business closed between 2009 and 2011.

While the size of a potential fine remains unclear, legal and accounting costs related to the US matter totalled 38-million Swiss francs ($41m) last year, the company said on February 4.

The bank may also shut undeclared German accounts if customers do not address their financial duties, Jan Vonder Muehll, a spokesman for Julius Baer, said on April 8. Germany’s parliament last year rejected a bilateral solution over undeclared accounts in Switzerlan­d after opposition parties said the agreement contained too many loopholes for tax evaders.

“Swiss banks with European clients are going strongly for a white-money strategy,” said Andreas Lenzhofer, a consultant at Booz & Company in Zurich.

“As declared money is less profitable, they need to continue to reform their operating models and target new markets.”

Julius Baer, establishe­d in 1890, exceeded 200-billion francs in client managed assets this year as it began integratin­g non-US wealth-management units acquired from Bank of America for Merrill Lynch. The company has said it expects to absorb as much as 72-billion francs of new customer assets.

Gains in bond and equity prices this year also boosted client funds, Mr Sauter said. At the same time, regulatory changes are increasing costs, he said.

Swiss wealth managers are building onshore networks in Europe as a crackdown on tax evasion pushes rich Europeans to repatriate money. Julius Baer has said it recorded “healthy” inflows at its German branches last year and forecast them to be profitable by the end of next year.

The firm is jointly applying for a banking licence with Kairos Investment Management to sell onshore wealth-management services to Italians.

Swiss private banks are also investing in emerging markets such as Asia and Latin America, where growth in private wealth is outstrippi­ng that of Europe.

The Merrill Lynch integratio­n “represents a rare opportunit­y to markedly increase our position in key growth markets,” CEO Boris Collardi told investors yesterday.

The acquisitio­n will double Julius Baer’s activities in Asia, add five locations in India and the largest wealth manager in Uruguay, said Mr Collardi.

Julius Baer rose 1% yesterday afternoon, extending this year’s gain to 12%. Bloomberg

 ?? Picture: BLOOMBERG ?? REFOCUS: A pedestrian passes a sign outside the offices of Julius Baer Group in Geneva, Switzerlan­d.GILES BROOM
Picture: BLOOMBERG REFOCUS: A pedestrian passes a sign outside the offices of Julius Baer Group in Geneva, Switzerlan­d.GILES BROOM

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