Cross border payments and FX risk management
Tips for banking in Switzerland - is there a better way?
For decades the wealthy have chosen Switzerland for their banking partner and see the country as a safe haven, (especially in times of global unrest and economic crisis). So much so that there are even those that believe the CHF may have become a proxy to gold - the pick of the bunch when it comes to safe-haven investments.
So what are the benefits of Swiss banking?
- The highest level of privacy in an increasingly transparent world
- Strict secrecy laws, Swiss bank employees are forbidden to divulge information
- Designed specifically with wealthier individuals in mind
- Reliable Swiss quality service
- Long-term political and economic stability, Swiss neutrality
- Acts a safe haven in times of volatility
There are some nuisances with Swiss banking;
- Account opening process can be cumbersome for US clients and thus mean the slower deployment of capital
- Opening, maintenance and transaction fees can be higher
- Often accounts require minimum balances
- Owners have limited access to funds (no ATMs etc.)
- Online access can be limited
- Mostly 0% or negative interest depending on the amounts
So does banking in Switzerland need to be confusing, complicated and slow?
Establishing a CHF account with an alternative provider can be a far simpler alternative. Utilizing their existing payment rails, currency buying power and expertise will reduce the costs and time associated with completing your cross border transactions; with the same personal service, you have come to expect with your Swiss banking counterparts.
- Accounts can be opened for individuals or entities both inside and outside of Switzerland
- Rates are completely transparent, usually far cheaper than the traditional retail banks
- No fees for opening or maintaining an account
- Hedging solutions for individuals, companies, trusts, and managers and in some cases at 0% collateral.
Questions to ask your CHF account provider:
- What are the KYC requirements to open an account?
- Do I need to be a resident?
- Are there any maintenance fees associated with holding funds abroad?
- What are your execution fees for converting USD into CHF or CHF into USD?
- Are there any additional wire fees?
- Do they provide hedging solutions?
Below is a recent transaction we completed for a private client. We were able to save them nearly 1% in transaction fees. In the past, we have seen savings as much as 3%!
Finally, understand your currency risk - you may not need to hedge it, but at least know what portion of your capital is at risk of being wiped out by currency movement.
Currently, CHF has a monthly volatility of 1.8% (annualized 6.28%), which translates to a Value at Risk90% of 8%/annum. Hedging costs vary depending on what you’re doing.
If you are selling CHF/buying USD you can actually make 2.5% a year (fewer fees and cost of collateral) whereas, buying CHF/ selling USD will cost you just under 3% a year (plus fees and cost of collateral).
At Deaglo we assist investment managers, companies and private clients with the execution and risk management of cross border transactions. If you are looking to move money from one currency to another, then please reach out and we would be happy to assist. We, along with unbeatable rates, utilize the next generation of hedging tools to understand your risk and to help you make more optimal execution decisions.