Liechtenstein

Reliable and Sustainable Partner in Wealth Management


By Simon Tribelhorn, CEO of the Liechtenstein Bankers Association (01/08/2017)

 

The Liechtenstein financial centre is one of the most stable worldwide and an important factor for the prosperity of the economic sector in Liechtenstein. It is internationally oriented, contributes 24 percent to GDP, around 40 percent of the country’s tax revenues and offers nearly 6,000 qualified jobs, which equates to 19 percent of the total jobs in Liechtenstein. It’s no wonder that the financial centre and banks achieve attractive rankings in international assessments.

 

The Liechtenstein financial centre is deeply interconnected in Europe as well as internationally. Political and economic stability make Liechtenstein unique. As a member of two economic areas – the EEA and Switzerland – Liechtenstein also has particularly attractive location conditions. The international rating agency, Standard & Poor’s recently reconfirmed Liechtenstein’s Triple-A country rating with a stable outlook. The report by Standard & Poor’s highlights the great efforts of recent years as well as the healthy state budget. Additionally, the rating agency commends the active implementation of international regulatory requirements in the financial centre area. In connection with the stable outlook, the rating agency expressed its expectation that an active approach be maintained in the area of regulation and that preservation of the national economy remains a high priority. “In an environment that is still demanding, this top mark for Liechtenstein cannot be taken for granted, but is a signal that this course along the right path should be persistently maintained,” said the Liechtenstein government.

Reliable International Partner

Liechtenstein has been a reliable partner of the international community for years. At the end of January 2016, Liechtenstein signed the Multilateral Agreement on Country-by-Country Reporting as part of the Base Erosion and Profit Shifting (BEPS) Action Plan. On 22 August 2016, Liechtenstein also deposited the ratification instrument for the Council of Europe Convention and the OECD on mutual assistance in tax matters (Mutual Assistance Convention) with the OECD in Paris. With the ratification of the Mutual Assistance Convention, Liechtenstein is taking another important step in the implementation of its financial centre and tax strategy, and in fulfilling its international obligation to implement the applicable international standards. This Agreement entered into force on 1 December 2016 and is applicable for the tax year beginning 1 January 2017. Liechtenstein has thus done its homework, which began with the Liechtenstein Declaration in 2009 and was affirmed by the government declaration in 2013. Liechtenstein has not only fulfilled its international commitments with this, but also created legal and planning certainty for clients of the financial centre. The OECD commended the steps taken by Liechtenstein to improve tax cooperation. The Council of Europe also welcomed these developments. It draws a very positive conclusion in its report of 13 December 2016. European ministers from the EU countries praised Liechtenstein’s excellent performance record in the implementation of EU legislation concerning the European Economic Area. The Council also recognised the great commitment that Liechtenstein has made to the EEA as part of the integration of the EU Financial Market Regime. Ministers were satisfied with the progress made in the area of tax co-operation. The Council also welcomed Liechtenstein’s dialogue with the EU on corporate taxation as well as its participation in OECD measures to combat tax avoidance by multinational corporations.

Successful Banks

Banks in Liechtenstein have always excelled with their stable, long-term oriented business models and extremely sound equity funding of more than 21 percent on average. This puts them among the world’s most stable banks. In 2016, the banks performed exceptionally well again. Private banking has always been and remains the core business of the Liechtenstein banks. The net new money acquired in 2016 represent an increase of almost 10 percent. At the end of 2016, the 15 Liechtenstein banks managed cumulative assets of more than 230 billion Swiss francs; more than in 2007 before the financial crisis. Thanks to their stability and solid foundation, they are able to act from a position of strength and have defined their business models in a tax-compliant environment as well as orienting them towards the long term. Growth strategies were consistently pursued and sustainable investments were made, for example, in expertise and digitisation. The banks are expanding in the growth and domestic markets. The Asian market is particularly attractive as one of the largest growth markets. It is a fact that Liechtenstein banks are very international and their international locations have become pillars of the asset management business. With 4,620 employees at home and abroad, they are also among the most important employers in Liechtenstein and are an important economic factor.

Sustainable Strategy – Roadmap 2020

Stability, quality and sustainability are the long-term cornerstones of Liechtenstein banks’ strategy. The vision of the banking location is to be perceived as a respectable, sustainable and stable financial centre at the heart of Europe, and to be known for excelling in the field of private banking with its strong innovative drive, efficiency and proven expertise. The banks and financial centre offer holistic solutions, tailor-made products and top services to their demanding, internationally-oriented clientele. Liechtenstein is already regarded as a modern financial centre that represents transparency and stability. 

Sustainability has become a benchmark for the performance of banks. The trend towards meaningful investments – particularly among wealthy and institutional clients – is set to continue. The consideration of ESG criteria will thereby be demanded more often: expertise that is now firmly established at the banks. Responsible and sustainable trading is a basic premise and integral part of the financial centre’s culture.

International Top Rankings

In 2016, the Global Sustainable Competitiveness Index, an international study on sustainable growth, ranked Liechtenstein in 13th place among 180 countries worldwide. Liechtenstein can therefore claim to be one of the most sustainable and competitive countries. The most recent Global Financial Centres Index (GFCI) 21 ranked Liechtenstein’s financial centre in 48th position in March 2017, eight  places higher than in the previous year. Among Western European financial centres, Liechtenstein ranks among the top 15. The GFCI initiators attest to Liechtenstein’s special depth in the specialisation of financial services. And the broad diversification of the financial centre is in fact a strength. Asset managers, trustees, family offices, insurances and funds are also part of the broadly based financial centre, in addition to banks. This means that all the financial requirements of wealthy clients can be covered as a one-stop shop from Liechtenstein. Last but not least, the banks affiliated to the banking association receive numerous awards for their performance every year. In 2016 alone, several awards were given to Liechtenstein banks for products, management, service quality and employer rankings.

Digitisation and FinTech

The entire industry is in the midst of a comprehensive digitisation process that breaks the traditional value chain and fundamentally changes familiar business models. The Liechtenstein banks see this as a challenge, but at the same time also see great future potential to develop the existing business models further through the integration of innovative and above all sustainable solutions from the FinTech area in the interest of the customers. The banks are consequently investing a lot into this area. In addition, digitisation is an integral part of the long-term strategy of the banking association, the Roadmap 2020, and is thus clearly a strategically important topic for the entire banking sector. With attractive modern conditions such as the regulatory laboratory established in financial market supervision, Liechtenstein has created a good prerequisite for the financial centre’s further prosperity in the digital sector.

Great Optimism at the Financial Centre

 

The positive developments are attested to by customers and market participants. At this year’s Finance Forum in Liechtenstein, 90 percent of attendees rated the outlook for the financial centre as either good or very good. This is another significant increase compared to the previous year. However, 58 per cent still regard the biggest challenge to be the management of regulation, yet 26 percent are already aware that digitalisation of financial services follows closely behind as a challenge of tomorrow. However, it was also clear that in the future the ‘machine’ will not replace people in consultation-intensive sectors of the financial industry, such as asset management. Liechtenstein’s banks already have the future clearly in sight; consequently, they are investing above all in the widening of expertise and a further increase in the quality of their products and services. Thus, the Liechtenstein financial centre will continue to hold its ground as a small but very smart and innovative financial services hub in the future.