* Banks say demand for safes has increased
* Large-denomination Swiss franc bills more popular
* Euro crisis, new tax rules fuel uncertainty
By Catherine Bosley
ZURICH, June 25 Investors trying to protect
their wealth from global economic uncertainty have been stashing
bank notes, gold bars and other valuables in Swiss banks,
fuelling demand for safe deposit boxes.
The euro zone debt crisis and fear that loose policy by
central banks will stoke inflation have sent investors in search
of extra security. New deals to prevent secret bank accounts in
Switzerland being used for evading taxes may also be
contributing to the trend.
Some banks in Switzerland, known for its financial
stability, say they have even run out of space.
"We are experiencing a rise in demand for safety deposit
boxes. This rise can't really be quantified, however. In many
branches the safe deposit boxes are fully rented," said Albert
Steck, spokesman at Migros Bank, a cooperative bank which serves
Zuercher Kantonalbank (ZKB) said requests for space in safes
has climbed this year, as the euro zone debt crisis deepened and
the outlook for the global economy worsened.
"Since the start of the year demand for safe deposit boxes
has risen in the low single digits," said spokesman Igor Moser.
Baloise, an insurance company, said several bank
clients had asked recently to raise the amount of coverage for
the contents of safe deposit boxes.
"It's therefore likely that safes at some banks are somewhat
fuller than they were a few years ago," said Baloise spokeswoman
Another sign anxiety is rising, is that a phenomenon last
seen when the financial crisis erupted in 2008 has reappeared:
Appetite for Swiss franc bills has grown, according to Swiss
National Bank data.
"This development was due largely to high demand for 1,000
franc notes, which points to the fact that the additional demand
was primarily for storing money," an SNB spokesman said.
With central banks around the world flooding markets with
liquidity, some people fear spiraling inflation. The wealthy
want assets that keep their value if prices rises.
"So much money has been pumped into the system that people
are worried about inflation down the road," said Bruno S. Frey,
professor of economics at the University of Zurich. "You counter
that by buying real assets of material value."
Gold is one option. An Italian businessman was recently
caught trying to smuggle gold bars into Switzerland under his
car seat. In further evidence of rising interest in gold, ZKB
has seen demand for its gold-backed exchange-traded fund rise
over 20 percent since 2009.
Fine art and property are also considered sure bets in
troubled times. The Swiss housing market is booming and the
price of fine art has been on the up.
"Assets barely earn interest and blue-chip stocks move in
one week what they used to move in one year," said Ulrich
Koerner, chief operating officer of Swiss flagship bank UBS
"Against that backdrop, some people say they would rather
buy a nice painting instead of a mutual fund."
The interest in real assets and in safe-deposit boxes may
also be linked to offshore clients of Swiss banks, looking to
find a way to circumvent pending deals with Germany, Austria and
Britain that would tax their secret accounts.
Safe deposit boxes are not included in the tax deals,
because their contents are not considered bankable assets.
Switzerland says safe deposit boxes cannot be used as a way
for lots of people to get out of paying tax.
"It's not a way for people to escape the tax deal on a large
scale," said Mario Tuor, spokesman for the Swiss federal office
in charge of negotiating the agreements.
If account balances decline by more than 20 percent in the
past two years, then the retroactive levy will be assessed based
on the balance in late 2010, he said, precisely to prevent
people from pulling money from their accounts.
But one private banker in Zurich told Reuters in May he was
giving his "smaller" clients with less than $2 million in funds
the following advice:
"If you have a small amount of undeclared money, the
smartest thing you can do is withdraw it in cash and put it into
a safe deposit box," the banker said.
The bilateral tax deals, which are scheduled to come into
effect next year, preserve privacy by imposing a one-off levy on
undeclared legacy capital, plus a tax on future earnings.
Clients who refuse the tax face having their names revealed to
foreign tax officials.
There is no official data on how much undeclared wealth is
sitting in Switzerland, whose banks hold about $2 trillion in
offshore assets. But according to some estimates Germans alone
have 200 billion euros in untaxed funds in Switzerland.