Swiss banks planning own transformation

The spectre of revolution is stalking the world of Swiss private banking as two paragons of discretion prepare to open their books.

Geneva's Pictet, and Lombard Odier, founded more than 200 years ago, have decided to transform themselves into banks like any others - almost.

The move is part of a drive to improve transparency and protect Swiss banking from scandals such as the Madoff case in the US, analysts say.

Swiss private banks operate under rules that make the wealthy managing partners personally responsible for the money they manage. In other words, if the bank gets into trouble, the managing partners can lose all their assets, not just those they have invested in their bank.

That tradition of unlimited liability for those who run private banks has long been seen as an enticement for rich customers who want the comfort such a guarantee provides.

Not being listed on the stock exchange, the Swiss banks do not have to publish their results, meaning their business is the preserve of a closed circle of clients.

But, from next year, both Pictet and Lombard Odier are to recast themselves as a "corporate partnership", a hybrid status that will make it easier to compare them with fully listed Swiss players such as Credit Suisse and UBS.

Similar to the "limited company" structure, with its well-known "Ltd" label, the structure will enable the banks to tap the investment market while maintaining the principle of managing partners' responsibility.

According to a Pictet spokesman, neither bank will be publicly listed and only private investors are to be tapped for capital.

After the reform is in place, the managing partners will risk only the funds they have invested in the bank instead of having to put all of their personal assets on the line.

"This legal structure allows us to maintain the benefits of a private partnership - such as our independence, strict sense of responsibilities and our long-term management outlook - while ensuring that our interests remain aligned with those of our clients," Patrick Odier, senior partner of Lombard Odier, said.