Beyond Borders: Europeans Stash Money Elsewhere

Wall Street Journal
December 19, 2011

Southern European investors, fearful of the health of their banks and the future of the euro, are increasingly stashing their wealth in currencies, real estate and investment products outside the euro zone, say bankers and government officials.

In a troubling sign for European banks, investors in Greece, Portugal and Italy are asking bankers and lawyers for ways to protect their money in the case of a failure of euro-zone banks or a breakup of the euro itself. Some are converting deposits into currencies such as the Swiss franc. Others are buying real estate outside the monetary union, such as in London, or setting up trusts to hold their wealth in jurisdictions as distant as Singapore or the Bahamas, say bankers and lawyers.

While European leaders had hoped that the Dec. 9 agreement on a stronger euro-zone fiscal pact would calm such jitters, tensions instead remained high last week, when the euro hit its lowest level against the dollar since January. Moreover, in Italy's first auction since the pact, the government had to pay a euro-era record yield of 6.47% to sell five-year paper, up from 6.29% a month ago.

As a result, the capital flight is likely to continue and could intensify, say experts. "Clients such as white-collar professionals and business owners see a risk in the Italian banking system," says Andrea Cingoli, chief executive of Banca Esperia, a Milan private bank with €13.5 billion ($17.6 billion) under management. "As a result, they are looking at their options overseas."

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