The Future of Swiss Private Banking

Turning regulation into value

Media Conference16 April 2015

1© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

Agenda

10:00 Welcome Andreas HammerHead of Corporate Communications, KPMG Switzerland

10:05 Introduction Philipp RickertHead of Financial Services and Member of the Executive Committee, KPMG Switzerland

Study Results Prof. Dr. Dr. Tomi LaamanenChair of Strategic Management, Institute of Management, University St.Gallen (HSG)

Hans StammAudit Financial Services, KPMG Switzerland

Key messages Philipp RickertHead of Financial Services and Member of the Executive Committee, KPMG Switzerland

11:30 Lunch

Introduction

Philipp Rickert

Head of Financial Services and Member of theExecutive Committee, KPMG Switzerland

3© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

KPMG Private Banking Thought Leadership over the past 5 years…

2009 2010 2012 2013 2014 2015

Private Banking Report

(Performance)

Private Banking Survey (Future)

4© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

«Transnational regulation ensures an international level playing field and restore the industry’s reputation.»

Wealth of transnational regulation

Presentation study results

Philipp RickertHead of Financial Services, KPMG Switzerland

Prof. Dr. Dr. Tomi LaamanenChair of Strategic Management, Institute of Management, Universität St. Gallen (HSG)

Hans Stamm Audit Financial Services, KPMG Switzerland

Restoring trust and securing Swiss banking preeminence

7© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

Transnational regulation enhances the competitiveness of Swiss banks

Adopt a united voice and shape a common agenda between Swiss authorities, FINMA, and the banking industry

Participate proactively in creating transnational regulation Ensure reciprocity of market access Ensure strict supervision and controls when introducing transnational regulation to secure an

international level playing field

8© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

Regulation is necessary to protect client assets and restore trust

Regulation must protect the trusted relationship between banks and their clients Regulation is seen to provide transparency and help clients decide on product and services Regulation is not considered to improve clients’ satisfaction

9© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

An appropriate and principle based regulatory approach is necessary

Principle based approach for implementation: − regulators decide what should be regulated− banks decide how it should be implemented

Ensure early and proactive involvement of banks with authorities to create / adopt meaningful regulations

Banks’ strategy and business models

11© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

Rethink your business model to realize efficiencies and pursue growth.

Regulation requires to sharpen the strategic positioning

Cantonal banks (CB): higher industrialization enabled by retail banking operations

Pure private banks:− Pure differentiation

strategy (PB1)− Client based

differentiation & technological differentiation (PB2)

Global private banks (GPB): combine operating scale, technology and differentiation

12© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

Smaller banks will increasingly become niche players

Minimum size of a bank will increase due to regulation Focus activities on core markets also for larger banks Consider collaborations and outsourcing of non-core activities

Operational Excellence

14© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

Digitalizing operations leads to increased efficiency

Client expect private banks to provide the same level of digital technologies as retail banks Assess the advantages of being a first mover vs. taking time to see what technologies are

successful Consider joining forces with technology providers to co-create solutions

15© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

Big Data is needed to be compliant

Collect structured data to enhance the effectiveness of clients targeting Provide better-tailored offerings to clients thanks to additional data Bring expert from another industry to improve segmentation, use and analysis of client data

16© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

BoD and Management have a crucial role in implementing regulation

Define at BoD level the implementation strategy and principles Consider the skill sets and expertise needed by the BoD to supervise regulation implementation

and sustainable compliance Help Relationship Manager understand and comply with regulation

Improved Customer Relationship Management

18© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

Communication is becoming more frequent and intensive

Ask clients how they want to communicate and build specific clusters (face to face and/or electronic)

Provide RM with electronic devices such as tablets to enable simulate portfolio’s outcomes Develop usage of social media channels for general information purposes

19© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

Relationship Manager role and profile is changing fundamentally

Make the RM the client’s «mini family officer» and sparring partner Free up RM time to spend more time with clients and on service quality and delegate work to

specialists Ensure RM incentivization is in line with the bank’s strategy and culture

Key messages

Philipp Rickert

Head of Financial Services and Member of theExecutive Committee, KPMG Switzerland

21© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.

Key messages

Transnational regulation is crucial to the banks’ survival.

Appropriate and principle based regulatory approach is crucial.

Regulation should be implemented promptly, focusing on added client value.

Business models have to be rethought in order to realize efficiencies and pursue growth.

Technology has to be used for effective operationalization.

Relationship Management approach and client communication have to be evolved.

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The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

© 2015 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks.