Switzerland's second largest bank is integrating its US offshore wealth management business into its onshore private bank.

Credit Suisse is integrating its US offshore wealth management business into its onshore private bank, in a move that will see a small advisory unit in Switzerland shut down.

The Credit Suisse Private Advisors unit, which consists of 10 relationship managers, is registered both with FINMA, the Swiss regulator, and the Securities and Exchange Commission and the Financial Industry Regulatory Authority in the US. This dual-country registration and regulation allowed its advisors to travel and do business between the two countries.

Following the integration, clients will be given the option of managing all their assets held with Credit Suisse through one US-based relationship manager. In the US, the private bank operates through 15 locations with around 400 relationship managers.

The decision “follows the bank’s ‘Future Private Banking’ analysis which emphasized taking advantage of efficiency gains across the organization,” a spokesperson said. This initiative is seeking to increase private banking's contribution to the group's pre-tax income by SFr800 million ($870 million) by 2014, through a focus on productivity. As part of this, Credit Suisse is fully integrating Clariden Leu into its bank, with expected annual cost savings of around SFr200 million and some job reductions that count towards an intended 3 per cent staffing reduction over two years.

Meanwhile, both Credit Suisse and Clariden Leu announced recently they are in the process of informing clients suspected of evading US taxes that they are transferring some client account details to the US authorities. This relates to a request from the Internal Revenue Service for administrative assistance, under the 1996 tax treaty between the US and Switzerland. The request reportedly covers accounts maintained at any time over the period from 1 January 2002 through to 31 December 2010.

A cost-intensive model

As the Private Advisors business operated in a complex legal environment, with registration requirements in both the US and Switzerland, the costs were high relative to its size.

The majority of the 10 relationship managers are expected to remain within the bank, a spokesperson told Family Wealth Report. The business unit forms a very small part of the firm’s operations in Switzerland, where it overall has some 2,000 relationship managers. The Swiss bank still has openings for relationship managers and there is strong demand for client-facing staff at the moment, which is the reason they will likely be re-deployed, the spokesperson said. However, given that the integration will take some six-to-eight months, exact plans for the staff can’t be confirmed yet.

The latest development follows a decision by Credit Suisse early last decade to focus its US business towards onshore wealth management, as well as an exit of the traditional offshore model by the firm in 2008 (as opposed to the dual regulated model being exited in this case).

The compliance burden to serve the US offshore market is heavy, and the pressure on such offshore accounts has already caused a number of banks to change their strategy. UBS, along with fellow Swiss banks Wegelin and Julius Baer, no longer provides offshore banking services to US clients. Meanwhile, HSBC pulled out of the market in July.

Other banks, though, are taking a different tack: RBC Wealth Management has said it still regards the expat US citizen market as a valuable one to be wooed. Vontobel, another Swiss bank, has set up a unit to deal specifically with US citizens who have declared Swiss accounts.