Core and growth markets
Private banking business encompasses the national and international wealth management services of the LLB Group. It is divided into the local wealth management business with wealthy clients in Liechtenstein, Switzerland and Austria, as well as the cross-border wealth management business with foreign clients. The Private Banking Division achieved operating income amounting to CHF 91.0 million in 2012. This corresponds to a share of around 22.3 percent of the LLB’s total earnings. As at 31 December 2012, it managed 34.6 percent of client assets.
Our focus lies on the onshore markets of Liechtenstein, Switzerland and Austria, our traditional cross-border markets of Germany and Italy, and on the growth markets in Central and Eastern Europe as well as the Near and Middle East. We hold banking licenses in Liechtenstein, Switzerland and Austria. From these countries we look after our clients in Central and Eastern Europe. From our representative offices in Abu Dhabi and Dubai, we concentrate on our clients in the Near and Middle East. The assets under management from the emerging markets are growing at an above average rate and are steadily gaining in importance.
Tax issues are extremely important for the competitiveness of the Liechtenstein financial centre. Recent years have seen far-reaching changes. Liechtenstein has decided in favour of a strategy for its financial centre that counts on the tax compliance of its foreign clients. Bilateral, long-term cooperation agreements with foreign financial authorities form the basis of this financial market policy. At the same time, Liechtenstein wants to strengthen its profile as a professional centre for international, innovative and sustainable banking business (see chapter «»).
With the announcement of the Liechtenstein Declaration on 12 March 2009, the Principality agreed to comply with the global OECD standard in relation to administrative assistance in tax matters. In the meantime, tax information exchange agreements (TIEA) or double taxation agreements (DTA) for cross-border administrative assistance in accordance with the OECD regulations have been concluded with 25 countries. As at 1 January 2013, 24 of these agreements have come into force, including a DTA with Germany and one with the United Kingdom. On 1 January 2014, a withholding tax agreement with Austria will also come into force; this was signed on 29 January 2013 in Vaduz. Another important tax issue involves the «Foreign Account Tax Compliance Act» (FATCA). Liechtenstein decided in February 2013 to use the EU 5 pilot model as a basis for implementing the FATCA legal provisions.
Cross-border private banking is particularly dependent on regulatory and economic developments. Taking over the OECD 26 standard has reduced reputational risks for Liechtenstein and for Switzerland, as well as increasing legal certainty and planning security. In the medium to long term this will have a positive effect on cross-border banking. At the same time, the banks are confronted with lower margins. This development is attributable above all to stricter regulatory provisions and sharper international competition.
Private banking clients are frequently well-informed, experienced and professional players. They expect close contacts with their bank, as well as professional and comprehensive advice from specialist, friendly advisors, which helps them to achieve better investment returns than they could attain by themselves. They want trustworthy and transparent business policies, in which there is an alignment of interests between the bank and its clients.
The LLB Group believes that the quality of services, Liechtenstein’s economic and political stability, as well as the safeguarding of clients‘ private sphere, will further strengthen clients‘ trust in the long term. At the same time, since 1 October 2012, the LLB has acted as a trailblazer in Liechtenstein by making it standard procedure for new foreign clients to declare that they are tax compliant. High levels of international public debt, inflation expectations and political unrest are all indicating that Liechtenstein’s importance as a safe haven will increase.