L iechtenstein ’ s ban k ing sector Financial Stability Report 2018
Earnings before tax ( EBT ), individual view ( d omestic ) Earnings before tax ( EBT ) incl. foreign group companies
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Figure 17 Banking sector profits ( C HF million; percent ) Source: FMA.
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The business model of Liechtenstein banks primarily focuses on private banking and international wealth management. Based on self-reported income sources ( weighted by total assets ), private banking and wealth management services are the most important source of earnings for Liechtenstein’s banking sector ( see Figure 18 ), contributing to roughly half of total income ( 49 % ) when weighted by the size of the balance sheet. Traditional retail banking services contribute another quarter to total income, including bank lending ( 20 % ), payment transactions ( 4 % ) and trade finance ( 1 % ). While private banking activities are increasingly conducted at an international scale, with large local banks also expanding into Asian markets, the largest part – almost three quarters – of bank lending is regional business within the Swiss Franc currency area. “Other” sources of income also contribute roughly a quarter to banks’ income, confirming that banks follow specialized business models besides the con-
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ventional banking activities, including the launch and management of investment funds or trading activities. Liechtenstein banks have traditionally focused on the rather conservative business model of private banking and wealth management, but have avoided the more risky field of investment banking. At the same time, a certain degree of diversification with regard to banks’ income sources is welcome from a regulatory point of view.
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