View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. News
  2. Strategy
February 6, 2013updated 04 Apr 2017 3:28pm

Swiss private banks shed unlimited liability in historical shift

Private banks Lombard Odier and Pictet have broken centuries of traditions as they separately announced an end to their unlimited partnership to become corporate or limited partnerships (“société en commandite par actions de droit suisse” or SCA).

By Elsa Buchanan

Private banks Lombard Odier and Pictet have broken centuries of traditions as they separately announced an end to their unlimited partnership to become corporate or limited partnerships ("société en commandite par actions de droit suisse" or SCA).

The profound change signals a major shift in the traditional Swiss business model, meaning that for the first time in centuries, liability will lie with Swiss banks and no longer be vested in independent persons.

The shift arrives just weeks after Wegelin’s closure: under the unlimited legal structure Wegelin’s partners were personally financially liable for the bank.

But both banks said the shift had been a long-debated call, and that it had "nothing to do" with Wegelin’s recent tragic fate.

 

No more "private banks"

Under the new arrangement, the private banks will no longer be able to call themselves private banks, as by Swiss law a private banker acts under unlimited partnership.

But the shift does not mean the banks are looking for a change in capital.

The same-day announcement also means no bank will have a marketing advantage.

There are around 10 private banks still acting under an unlimited partnership in Switzerland.

 

‘No immediate plans for expansion’

According to the bank, an unlimited liability structure is favoured when a bank is looking to open branches and offices in foreign jurisdictions, but a source close to the matter said Lombard Odier had no immediate plans for expansion.

Pending authorisation by the regulatory authorities, the new legal structures will take effect on 1 January next year.

Following the change, Lombard Odier’s banking activities in Switzerland will remain under the ownership of its existing eight managing partners, and will be managed as a limited company – which is already the case for all operational subsidiaries of the group.

The new legal structure will become the holding company of all operating entities of Lombard Odier Group.

 

Lombard Odier: $205.9bn AuM

In 2012, the bank saw an increase of around 15% in its managed assets: the private bank had CFH188bn ($205.9bn) assets under management (AuM) as of 31 December 2012. "Markets have been helpful" and the need for more secured services were behind the rise, the bank said.

It employs 2,000 staff more than 17 jurisdictions, 24 locations worldwide.

 

Same-day announcement

As for Pictet, who announced its change in legal structure on the same day, the new structure will bring together the management of its group operating companies.

The group’s Swiss bank, Pictet & Cie, currently the only operating entity that has the legal form of a general partnership, will become a limited company alongside all the Luxembourg, Nassau and Singapore division of the group.

According to Pictet, the bank will gain in consistency and transparency as the new structure requires the banks to publish a consolidated annual report for the groups.

It will also implement an independent supervisory board for the corporate partnership structure.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Wednesday. The industry's most comprehensive news and information delivered every month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Private Banker International