With Falcon Private Bank’s demise seemingly imminent, rivals are well advised to look closely into this rare case of a closure.
Flacon Private Bank is about to close down. Owners and management team are looking for buyers of the client portfolio, according to reports by «NZZ» and «Reuters». Once they have found what they are looking for, they will hand back their banking license.
The reasons behind the calamity are numerous – and the list will remain incomplete. One came when decision-makers overruled concerns in the case of the Malaysian state-fund 1MDB to please the owners in the Middle East – it was the basis for the loss of license in Singapore and lastly then beginning of the end of Falcon.
The same owners also clashed with both Walter Berchtold and Arthur Vayloyan; the company plunged right into a crypto-strategy without having completed its bit soul-searching after the 1MDB disaster.
Problems Deeper Than Meets the Eye
The Swiss financial market has long held the view that a portfolio with assets below 10 billion Swiss francs as insufficient to survive in the long run. But the demise of Falcon is about more than that and holds some interesting lessons to be learned.
Both Falcon and BSI failed the 1MDB-test and paid the ultimate price. But other banks have also made problematic transactions at regular intervals. Credit Suisse and Julius Baer, for instance, have both been admonished by Swiss regulator Finma in the past two years.
Compared to Falcon, Credit and Baer are big international players with a healthy reputation to fall back on. But Baer CEO Philipp Rickenbacher and his predecessor Bernhard Hodler faced a tough task making their bank shine again – and the job isn’t over and done with yet.
Compliance Remains Key
A small bank, whose trustworthiness is the unique selling point, will find this much harder to achieve. Even bids to move forward fast – such as embracing crypto-banking by Falcon – may not help much.
Banks should cease to claim that their client centricity and investment competence is unrivaled. They aren’t and there’s a lot more available of the same.
It would help their clients more if banks made sure that a portfolio doesn’t become part of a forced sale – as seems the case over at Falcon. Compliance staff are key to this. They are often maligned for preventing new business opportunities. But not too infrequently, is it them who will keep the business on an even keel.
