Do a search for the family-controlled Swiss bank Hottinger & Cie and the top item that appears is a liquidation holding page. A further search reveals that Hottinger faces the wrath of the Swiss Financial Market Supervisory Authority, which has initiated bankruptcy proceeding against it.
It might be an extreme insight into to the world of family-controlled banks in Switzerland, but it reflects the reality that faces the country’s family-owned banks today. Many of them are feeling the heat like never before and their numbers are dwindling. Venerable family-controlled banks like Hottinger, Wegelin & Cie, Darier Hentsch & Cie, Bank Leu and many others have disappeared in the last 15 years through acquisition, or worse, failure.
Of course, family-owned banks continue to thrive in the Alpine country. Names like Pictet, Lombard Odier, Mirabaud Group, Bordier & Cie are among the country’s most trusted banks and continue to be well capitalised and managed. It should also be noted, that Hottinger & Cie isn’t connected to the venerable family-controlled Banque Hottinguer in France, as the latter’s website makes very clear.
But, at a time when the family-business model is looked at more favourably than possibly ever before, the demise of families controlling financial firms is an unwelcomed development.
Number of Swiss Banks
In the last 14 years the number of Swiss banks has fallen by more than a quarter, according to a recent report by the Swiss Bankers Association, quoting Swiss National Bank numbers. OK, some of this fall is due to foreign banks closing their Swiss subsidiaries and non-family-owned banks merging, but the downward trend is happening across the board. At the same time, SNB numbers show assets under management rising during the same period by 43% to a massive SFr3 trillion. With assets rising and the number of banks falling, the only logical explanation is the bigger banks are gaining a bigger slice of the pie as consolidation gathers pace.
Under these developments, the pressure to sell for the smaller family-controlled banks is huge. Profits have been squeezed in the last ten years as a result of pressure on Swiss banking secrecy from regulators across the globe, but mostly from the US. Analysts say that banks managing assets of between SFr5 billion and SFr25 billion are particularly vulnerable. “They don’t have the staff numbers to serve clients, which are increasingly in emerging markets,” says one local analysts.
In some cases, even where families still control banks, the role of these families has waned. The death earlier this month of Hans Vontobel, the largest single shareholder in the Swiss bank Vontobel, prompted speculation that the family might consider selling parts of the business or the entire bank to bigger rivals. Although its chairman Hans-Dieter Vontobel, the son of Hans Vontobel, told staff that the family is committed to the bank, Vontobel is seen by some as still vulnerable to takeover.
Some have speculated the bank, which traces its history back to 1936, could go the same way as Bank Sarasin. The Basel-based bank was also family controlled before it was taken over by Safra Holding a few years ago. Some also think that family control of Pictet, Lombard Odier and Mirabaud has also been eroded since they moved to a corporate partnership structure in 2013. Previously, they were unlimited liability partnerships, which made family members liable for losses at the bank. Under the new structure that doesn’t exist anymore and family members no longer have skin in the game like they use to.
As with all these things nothing happens in a linear way. When one family bank gets bought, another one can emerge. Bank Safra, the new owners of Sarasin is family-controlled, albeit from Brazil and Monaco. But few would dispute that family-owned banks in Switzerland are being squeezed.
Unless they can reinvent their business models in the years ahead their numbers are likely to be further diminished when the Swiss Bankers Association does their annual survey on the sector in 2025.