The Swiss banking giant, Zürcher Kantonalbank (ZKB), has announced its decision to withdraw from Austria. This move, which was long overdue from a regulatory standpoint, marks the end of an unsuccessful chapter in the bank’s history.
The investment in Austria was problematic from the outset, with issues at the Salzburger Privatinvest Bank (PIAG) emerging shortly after the 2009 purchase. These issues included misuse of customer funds and dubious clients, which damaged the reputation of ZKB. Despite resolving these legacy problems, the bank struggled to establish itself operationally in Austria.
With a goal of gaining access to the EU market and its wealthy private customers, ZKB fell short of expectations with customer assets of 3 billion francs. To address these challenges and focus on existing markets and strategic priorities in private banking, ZKB has decided to sell its subsidiary in Austria to Liechtensteinische Landesbank (LLB). This move includes transferring business operations, locations, and approximately 120 employees.
From a regulatory and business perspective, this withdrawal from Austria is a logical and necessary step for ZKB. The decision reflects the challenges faced by state-owned institutions operating outside their home region due to regulatory burdens abroad and self-sufficiency requirements in terms of revenue. However, digitalization offers opportunities for financial products to be scaled nationwide without requiring physical expansion beyond Switzerland’s canton of Zurich.
In conclusion, while ZKB’s decision to exit Austria may be overdue from a regulatory standpoint, it reflects the changing landscape of banking and presents opportunities presented by digitalization. State-guaranteed institutions like ZKB must navigate a competitive and rapidly evolving market to ensure sustainable growth and stability while focusing on existing markets and strategic priorities in private banking.