Indian money in Swiss banks falls by over 10% to Rs 12,615 crore

Mumbai(PTI): Money held by Indians in Swiss banks fell by over 10% last year to 1.8 billion Swiss franc (about Rs 12,615 crore), amid an enhanced clampdown against the famed secrecy wall of Switzerland’s banking system by Indian and other governments.

The funds held by Indians with banks in Switzerland fell by CHF 215 million to CHF 1,815 million (1.98 billion in the US dollar terms), from 2,030 million Swiss franc, as per the latest data released today by the country’s central banking authority SNB (Swiss National Bank).

This is the second lowest amount of funds held by Indians in the Swiss banks and follows an increase of over 40% in the previous year, 2013.

In contrast, the money held in Swiss banks by their foreign clients from across the world surprisingly rose during 2014 to 1.5 trillion Swiss franc (USD 1.6 trillion or Rs 103 lakh crore), from about Rs 90 lakh crore at the end of 2013 — the record low level so far.

During 2012, the Indians’ money in Swiss banks had fallen by over one-third to its lowest ever level of 1.42 billion Swiss franc (Rs 8,530 crore).

As per the latest data, the total Indian money held in Swiss banks at the end of 2014 included 1,776 million Swiss franc or Rs 12,350 crore held directly by Indian individuals and entities (down from 1,952 million a year ago), and another 38 million Swiss franc (down from 77.3 million Swiss francs at 2013-end) through ‘fiduciaries’ or wealth managers.

However, “amounts due to customers’ savings and deposit accounts” was only CHF 52 million (down from CHF 63 million a year ago), while over CHF 100 million was due through other banks and the remaining amount of well over one billion Swiss francs have been classified as “other amounts due to the customers” from India.

Last year, it fell to CHF 115.1 billion, although the decrease was less pronounced than in previous years.

In Switzerland, conditions were relatively favourable in 2014, but have become more challenging due to the strong appreciation of the Swiss franc that followed the discontinuation of the minimum exchange rate in January, 2015.

Under its baseline scenario, the Swiss National Bank (SNB) is assuming that global economic conditions would improve, as economic growth remains strong in the US and accelerates in the euro area.

Meanwhile, the strength of the Swiss franc reduces growth in Switzerland.

The further decline in interest rates on the money and capital markets carries the risk of a renewed increase in imbalances on the Swiss mortgage and residential real estate markets over the medium term, particularly in the residential investment property segment.

SNB said that over the past year, the Swiss big banks have continued to improve their capital situation, albeit at a slower pace than the year before.

They already meet most of the requirements of the Swiss ‘too big to fail’ regulations and the international Basel III framework, both of which will apply from 2019, it said and recommended that the big banks do not lose momentum in their efforts to improve their resilience.

This is particularly warranted with regard to the leverage ratio.

Resilience needs to be further improved for three reasons: “First, the risks associated with economic and financial conditions remain high. The big banks’ loss potential relative to their capitalisation continues to be substantial, both under the adverse scenarios considered by the SNB and when measured on the basis of the losses experienced during the recent financial crisis.

“Second, while the Swiss big banks’ risk-weighted capital ratios are above the average for large globally active banks, the same can’t yet be said for their leverage ratios.

“Third, it can be expected that regulatory developments at both international and national level will result in increased capital requirements.”

“The Swiss big banks should prepare for these developments,” SNB said.