Financial solidity

The assessment of a bank’s financial solidity is primarily guided by the shape of its balance sheet. Pictet Group’s balance sheet reflects excellent liquidity, outstanding asset quality and high capitalisation: 

• The Group’s liquidity coverage ratio was 178.9% as of 30 June 2023, considerably above the 120% internal minimum target and the 100% regulatory minimum.
• Pictet holds minimal illiquid assets and its loan quality is excellent, with high levels of strong collateral.
• The total capital ratio as at 30 June 2023 was 29.3%, well above the already stringent 12% requirement stipulated by the Swiss Financial Market Supervisory Authority (FINMA) for banks of Pictet’s size and profile. 

In addition, Pictet’s business profile provides the Group with resilient, recurring profits, which act as the first buffer against any financial shocks. 

FitchRatings and Moody’s Investors Service both award Banque Pictet& Cie SA some of the highest possible deposit ratings. FitchRatings has maintained Pictet’s AA- Issuer Default Rating (IDR) since its initiation in 2005. The AA- was last reaffirmed with a stable outlook by FitchRatings in August 2023. Moody’s Investors Service confirmed Banque Pictet & Cie SA’s long-term deposit rating of Aa2, with a stable outlook in August 2023.

Although the ratings are assigned to Banque Pictet & Cie SA, both agencies assess the consolidated Group. As a consequence, the financial strength of the whole Group is reflected in the ratings. The strengths that the two agencies highlight for Pictet include:

• Resilient business model and franchise;
• Very low credit risk;
• Comfortable capitalisation;
• Conservative approach to liquidity management with a high amount of high quality liquid assets;
• Strong and consistent earnings.

Several integral principles within Pictet’s conservative risk approach lessen the Group’s counterparty risk exposure. These include:

• no proprietary trading;
• client lending that consists of Lombard loans, i.e. lending that is wholly secured by quality assets of the client;
• maintaining ample liquidity. Pictet holds sizeable amounts of cash
  at central banks, high quality banks and investments in very highly
  rated short- and mid-term bonds. 
• carefully selected network of bank counterparties as sub-custodians, clearers, correspondent banks, etc., that mirror Pictet’s high credit quality as closely as possible.

Low risk counterparties - a protective layer for client assets. Pictet has three key principles for counterparty management:

• Counterparty management is considered a key pillar supporting Pictet’s financial strength.
• Pictet strives to use counterparties that are as close as possible to its own quality.
• Selection and monitoring practices are identical whether the counterparty is meant for clients’ or for Pictet’s own use. 

The ultimate responsibility for the Group’s banking counterparties and the limits related to activities with those counterparties resides with the Counterparty Risk Committee (CRC), which meets every six weeks or more frequently if need be.

• The Weekly Counterparty Committee (WCC) assesses requests fornew banking counterparties or limits for purposes of trading, cash transactions, treasury placements, custody of assets and fiduciary exposures. The WCC consists of diverse experts across the Group. Their decisions are presented to and reviewed by the CRC. As the name implies, the WCC meets weekly, or more frequently when necessary.
• The Banking Risk Committee (BRC) reviews the fundamental credit worthiness of Pictet’s most important bank counterparties, ensuring their continuous quality. Each bank counterparty is assigned an internal, forward-looking score. The BRC is composed of all the bank analysts within Pictet Group, who meet quarterly, or more frequently when necessary.

Additional assessments are required for the selection of custody and clearing providers. These include the evaluation of procedures, practices, systems and the experience of the operational teams at the counterparties. Importantly Pictet always builds a knowledge of the local infrastructure and regulatory environment to ensure the best possible level of asset protection. The standard of service of the provider, market infrastructure and local regulations are monitored on an ongoing basis by Pictet’s teams and during regular due-diligencevisits.

A number of legal and regulatory provisions protect client assets in the unlikely event of the bankruptcy of a custodian or a bank counterparty. These include:

• Client securities held at Pictet are fully segregated from Pictet’s own assets. As such, the securities are safeguarded against bankruptcy, i.e. they cannot be used to pay Pictet’s creditors, but will be returned to the client as part of the liquidation procedure.
• Client securities held with custodians are segregated from Pictet’s own assets and are deposited in compliance with local regulations:a) in a segregated account in the name of the client, b) in a nominee account in the name of Pictet, or c) in a nominee account in the name of the custodian. Whatever the segregation type, the clients’ securities are legally excluded from the bankruptcy estate of the custodian.
• Deposits at Pictet banks are first and foremost protected by thePictet Group’s strong financial profile, which has always been astrategic priority for the Group. In addition, they may benefit fromthe deposit guarantee scheme in place in each country.
• Fiduciary deposits are legally segregated from Pictet’s assets at the fiduciary counterparty, i.e. the fiduciary counterparty may not use the clients’ assets to offset any claim that it may have against Pictet. As such, the client’s rights are protected in the very unlikely case of failure. Conversely, the client bears the risk of the fiduciary counterparty. To ensure the safety of client assets held in fiduciary deposits, Pictet carefully selects the fiduciary deposit counterparties it recommends, always applying identical criteria to those used in selecting its own counterparties.