By Martin de Sa'Pinto and Chris Vellacott
ZURICH/LONDON (Reuters) - London is gaining in the battle for rich Middle Eastern families seeking shelter from political unrest at home, as its private banks and top end property sector tempt them away from Switzerland.
"It is true, the larger families are avoiding Switzerland," said a Geneva-based asset manager with clients in the region.
Switzerland is well-established home to a large chunk of Middle Eastern wealth, and some of the unwillingness to put money in the country's $2 trillion offshore wealth industry is due to an erosion of its fabled banking secrecy.
Concerns have long been growing that efforts to appease tax authorities in the United States and elsewhere have eroded its competitive edge over other jurisdictions, said one manager at a London wealth boutique.
Cracks developed in Swiss bank secrecy last year when UBS
was forced to hand over details of around 4,450 clients suspected of tax evasion in order to resolve a protracted dispute with U.S. authorities.
Meanwhile London's private banks, long standing rivals to their Swiss counterparts, received a boost last week when reforms of how rich foreign UK residents are taxed proved more benign than feared.
Further signs of London being favored comes from estate agent Savills, which has published research showing money fleeing "global uncertainty" helped top end London property buck stagnant prices elsewhere in recent months.
Many of the Middle East's rich feel at home, and own homes, in major European capitals like London and are moving some of their cash to where they feel they can monitor it better, said one banking source who works in the Middle East.
During the first days of turmoil alone, Bahrain's rich and powerful shifted 15-20 percent of their locally-held assets abroad, this person said.
Some bankers also point to recent moves by the Swiss to quickly freeze assets of people linked to ruling families in Libya, Tunisia and Egypt as spooking would-be clients.
The fear among some families is they may be subjected to intrusive scrutiny or unfairly caught up in a Swiss catch-all probe into assets held by authoritarian regimes.
In response, some bankers are calling for Swiss authorities to clarify who could be deemed "politically exposed persons" in case of any further crackdowns.
"Paradoxically, that might actually help Switzerland, as it will make it clear most people have little to worry about," said the Geneva-based asset manager.
Some Swiss bankers are starting to show signs of irritation, saying they have been quicker than others to target the assets of deposed or embattled leaders like Tunisia's Ben Ali or the Gadaffi entourage.
"The Swiss make rules and respect them. In Europe, they make rules but sometimes close an eye," said Yves Mirabaud, partner at Geneva-based private bank Mirabaud & Cie.
(Editing by Jon Loades-Carter)