Julius Baer private bank expands to net Indonesian rich

Vincent Lingga, The Jakarta Post, Singapore Wed, 09/08/2010 10:23 AM Business

The largest Swiss private banking group Julius Baer strengthened its commitment to making Asia its second home market by convening its board of directors meeting here last week, the first outside its Zurich headquarters, and announcing a faster pace of expansion in the region, including Indonesia, Southeast Asia’s largest economy.Julius Baer chairman Raymond J. Baer told a roundtable discussion meeting with financial editors on Monday that his bank would upgrade its Hong Kong office to a booking center, open an office in Shanghai and a trust company in Singapore, in addition to the branch office it set up in the city state in 2006.

The editor forum capped a series of meetings and gala events organized by Julius Baer in Singapore to launch its big bang expansion programs in the region. “Wealth creation in Asia has now outpaced that in the older, developed world and we are expanding our global wealth management, deepening and broadening our market penetration in Asia,” Raymond Baer noted.

A recent survey report by the Merrill and Capgemini consulting company projected that the assets of Asian millionaires will exceed those of their North American counterparts by 2013. In sharp contrast to its rival institutions in Asia, the 120-year old boutique Swiss wealth manager has been in an expansionary mode over the past few years, opening an office in Singapore in 2006 and another one in Jakarta in early November, 2008, during the height of the global financial crisis.

“We started with a staff of only 30 in Asia four years ago but now we have more than 400 with a target of double digits in net new money growth,” added Thomas Meier, chief executive for Julius Baer’s operations in Asia and Mid-East.Julius Baer globally booked US$165 billion in assets under its management as of last June.Julius Baer, however, will not compete head on with commercial banks in Jakarta because as a private bank it focuses and services only so-designated high net-worth individuals (HNWI) with at least $3 million in net financial assets for investment.Its services include asset and wealth management and tax planning, investment consultation and investment funds for both private and institutional investors and securities, as well as foreign exchange trading.

“We focus on the total integration of products and services, with emphasis on wealth protection and creation services, financial planning for short- or long-term goals,” deputy chief investment officer Lee Boon Keng said”

We are able to provide investment advisory services tailored specifically to the needs of our clients because we thoroughly analyze their risk profile, financial needs and review their investment perspective every six months,” Lee added. Julius Baer seemed to have also been benefitting from larger asset inflows because of its lack of exposure to the 2008 American sub-prime mortgage meltdown, which had damaged the reputation of several larger international banks.Clients used to look at the largest banks as the safest but as it turned out after the 2008 financial crisis, it was the big ones that had been most exposed.

“We will act as the catalyst to bring European know-how and investment expertise to Asia and bring Asian investment opportunities to Europe,” Julius Baer Group’s chief executive officer Boris Collardi said. None of the Julius Baer executives was willing to elaborate on the potential market and characteristics of the top rich in Indonesia because of confidentiality, but they all agreed the potential is very big, given the size and growth prospects for the country’s economy.

Raymond Baer asserted that the perception of the infamous Swiss reputation as a tax haven for ill-gotten wealth is now a thing of the past after the Swiss government enforced the Article 26 of the OECD Model Tax Convention which binds member countries to share information in cases of suspected tax evasion and other forms of tax crimes.

This regulation obliges the Swiss government to provide administrative assistance — not only in the form of information about document forgery, but also about tax fraud — to the authorities of requesting countries.“Our government has toughened its laws, requiring Swiss banks to know their clients [know-your-customer code of conduct] and sources of funds they intend to deposit. Would be depositors are required to divulge detailed information, which must be verified,” Baer added

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IMF warns of threat of capital outflow

Vincent Lingga, The Jakarta Post, Jakarta Fri, 06/11/2010 9:56 AM Headlines

The International Monetary Fund (IMF) charted out Thursday a rosy outlook for Indonesia’s economy for the rest of this year with an estimated growth of 6 percent, but warned the government that a volatile global environment could heighten risk aversion and sharply reverse capital flow.

An IMF mission said at the end of its annual assessment of Indonesian’s economy that volatile capital flow complicated the country’s policy strategy, but it urged the government to maintain its policy of exchange-rate flexibility in responding to changing global conditions.

“Globally, there is a lot of liquidity, but the global environment is still volatile even though the financial situation in Europe has stabilized. If the European situation worsens, then heightened risk aversion could trigger a reversal of capital flow,” Thomas R. Rumbaugh, chief of the mission, told a news conference.

Bank Indonesia (BI)’s Senior Deputy Governor Darmin Nasution revealed last week that more than US$2 billion flew out of the country during the height of the recent Greek debt crisis.
Rumbaugh praised the country’s economic resilience in weathering the 2008-2009 global financial crisis and recent turbulence in Europe and attributed the macroeconomic stability to prudent policies the government has pursued in coping with the recent dramatic shifts in the global economy.

The IMF saw BI’s current monetary stance as appropriate but cautioned that as credit growth recovers, the central bank should act firmly to anchor inflation expectations within the target range of 4-6 percent.

Rumbaugh observed the fiscal outlook this year is also supportive of economic stability and consistent with plans to further reduce public debts relative to gross domestic product, which is currently less than 30 percent.

But he urged the government to focus its fiscal policy on structural reforms.
“The tax ratio is simply too low, the government investment spending is too low due to slow budget execution, and spending on subsidies is too much,” added Rumbaugh, division chief at the Asia and Pacific Department.

Energy subsidies alone accounted for $14.5 billion or almost 13 percent of total government spending this year, while tax revenue as a percentage of GDP is less than 13 percent, the lowest in ASEAN.

He said the IMF’s projection of a 6 percent economic growth this year was based on a strong investment recovery as private consumption growth was estimated to remain at 4 percent.
“If investments, which were rather flat last year, do not recover strongly this year, the growth could be less than 6 percent,” he said.

During its 10-day visit in light of the IMF surveillance mechanism, the mission also discussed with economy ministers about the findings of the financial sector assessment program (FSAP) on Indonesia conducted recently by the IMF and the World Bank.

“The FSAP concluded the financial system has made remarkable progress over the last decade, with most major banks reporting high capital standards, comfortable levels of liquidity and solid profitability,” said Herve Ferhani, deputy director for monetary and capital market department, which co-led the assessment.

However, he warned that the government should promulgate clear-cut, precise legal guidelines for dealing with problem banks because the legal framework currently in place was not adequate. The government is in the process of proposing to the parliament a bill on a financial system safety net.

Ferhani also stressed the need for deepening the capital market with new instruments to provide investors with a wider choice of vehicles and reducing corporate reliance on bank funding as well as strengthening the law-enforcement authority of the Capital Market Supervisory and Financial Institutions Supervisory Agency.

“A capital market with a broader variety of instruments could help stem a sudden threat of a reversal of capital flow during times of market turbulence,” he added.

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