The rich are fleeing Switzerland in droves, where are they going?

International Business News – Among the world’s wealthy, there is a growing movement to withdraw money from Switzerland. The reason for this is the strong distrust of the Swiss authorities’ response to the bailout of Credit Suisse Group by UBS, a major Swiss financial institution, which wiped out the value of the company’s capital securities, the AT1 debt, overnight. This led to a strong distrust of the Swiss authorities. Some of the money went to powerful Asian cities such as Singapore.

Active banking in Singapore

“There has been a transfer of funds to Singapore,” says a Singaporean associate at the Family Office, which manages and operates the assets of the wealthy. A wealthy family born outside Asia has also set up an asset management base in Singapore as part of its diversification around the world. The family recently decided to move funds managed in Europe to Singapore.

Regarding the treatment of Credit Suisse’s AT1 bonds, the Swiss authorities said that it was based on the rule of zeroing out the value in the event of special government support being implemented. However, in general, AT1 bonds are reimbursed in a higher order than stocks, and this sudden zeroing out of value came as a huge shock to market stakeholders. The Swiss authorities’ approach also prompted the wealthy family to change its course.

Banks in Singapore and Singapore branches of U.S. and European banks were listed as specific recipients of funds transferred by the wealthy. The banking business is expected to continue to be active as the inflow of funds to banks within Singapore continues to increase. According to statistics, there will be 700 family finance offices in Singapore by 2021, with the affluent seeing Singapore as a hub for managing their money in Asia and setting up family finance offices.

No easterly wind for Hong Kong?

For Hong Kong, an Asian financial center on par with Singapore, the trend of “de-Swissing” the wealthy should have been an easterly wind. The head of the wealth management department of a major securities firm in Hong Kong reveals the same trend, saying that “some clients think the Swiss authorities cannot be trusted and want to move their money out of Switzerland”.

However, he also said that “the more cautious the clients are, the more they want someone from Singapore to be in charge”. Many wealthy people consider Hong Kong to be risky and a lower priority than Singapore as a place to transfer funds. The head of a Hong Kong-based insurance company with wealthy clients also said: “There has been no significant increase in insurance sales. Up to now, it seems that Hong Kong has not fully reaped the business opportunities this time.”

On the one hand, Hong Kong has not put itself out of the picture. The Hong Kong government released new tax incentives and other measures to attract family finance offices in late March. Hong Kong is one of the world’s leading asset management centers and has enjoyed solid growth in the innovation, arts and cultural industries, making it an ideal base for global family finance offices, said Financial Secretary Paul Chan.

HSBC, a British financial institution, also began experimenting with window operations seven days a week, including Sundays, from the same period at three branches in Hong Kong’s central neighborhoods. According to the bank, “the peak of business for local Chinese and overseas clients is on weekends”. Weekend operations also help attract the affluent.

The instability in the financial system triggered by the bankruptcies of bailed-out Credit Suisse and Bank of America remains strong, and financial and capital markets remain volatile. Which city will increase its presence in attracting investment capital? More intense competition may be on the horizon in Asia.