Swiss investors hot under the collar over Wegelin sell-off

The temperature in Zurich may be dropping well below zero but investors and private bankers are getting increasingly hot under the collar when it comes to the state of their financial system.

Following hot-on-the-heels of currency scandal which enshrouded former central banker Philip Hildebrand, another major blow has been dealt to one of the country’s oldest institutions.

The 270-year old private bank Wegelin & Co. last week sold off the majority of its non-US client base to the independent firm Notenstein Bank. The new entity, run by former Wegelin staff, was quickly snapped up by Raiffeisen Bank and made a subsidiary.

In a notice on the company's website, Wegelin acknowledged its asset management division had merged with its fund management arm to form 1741 Asset Management, now a subsidiary of Notenstein.

The move followed, what Wegelin described as an ‘increasingly threatening situation’ brought about by new FATCA legislation calling for  details of the bank's US client base to be handed over.

Writing after the sale, Konrad Hummler, managing partner of Wegelin and former Swiss National Bank Council member, described the sale as ‘extremely painful’ adding that he ‘never could have imagined that we, as owners of Switzerland's oldest bank, would ever have considered selling’.

Turning the screw

The Securities and Exchange Commission has turned up the heat on 11 Swiss banks to reveal the names and details of US taxpayers holding money in the country.

Swiss investors, most of whom wished to remain anonymous, are incensed by the sudden moves by the SEC to probe the Swiss financial system, with many claiming hypocrisy on the part of the Americans.

‘They have Delaware and Nevada, they operate with the same offshore mentality and yet they don’t put them under the same pressure they have done to Switzerland,’ one fund manager from a Swiss boutique told Citywire.

Death of secrecy

A research specialist with knowledge of the situation said: 'The US will eliminate Switzerland as a so called tax-oasis. But they forget all the tax-oasis' in the Anglo-Saxon world.’

The same source said the British Virgin Islands was currently holding road shows for private clients as a new offshore tax base.