The shake-up in Europe is leading to a widening gap between top performers and “also rans,” McKinsey said in an industry survey last month. Almost a third of private banks in the region had outflows of funds in 2012, while about one bank in six recorded a loss, according to the report, based on an analysis of more than 160 private banks globally.

“As a result, many players are reviewing their geographical footprint, especially in offshore markets, leading to renewed M&A activity,” the McKinsey report said.

An eastward shift in riches is nibbling away at Switzerland’s lead over rival centers of cross-border wealth. Its market share slipped to 26 percent from 27 percent in 2011, and by 2017 may decline to 25 percent, according to Boston Consulting’s Global Wealth report in May. Singapore is likely to grow to 12 percent from 10 percent, according to the forecasts.

Secrecy Crackdown

The U.S. has been investigating Swiss banks and units of foreign banks in the country, including that of London-based HSBC, after UBS AG in 2009 avoided prosecution by admitting it fostered tax evasion and delivering data on about 4,700 accounts of Americans. France and Germany have been searching for tax dodgers using data stolen from Swiss banks and also sharing some of the information with authorities in other European countries.

Agreements with the U.K. and Austria to collect taxes on behalf of those countries on accounts held in Switzerland have been in force since January, and Switzerland is in talks with other European countries on taxing secret accounts. The country will join the international push against tax dodgers and help develop global standards allowing banks to share customers’ details to combat tax evasion, Finance Minister Eveline Widmer- Schlumpf said in June.

“A combination of government actions from the U.S. and the EU and increased regulatory pressure is likely to trigger further changes in Swiss private banking because it will make it more costly to do business,” said Francois-Xavier de Mallmann, head of investment-banking services in Europe for Goldman Sachs Group Inc. “We expect consolidation to continue in private banking and to likely accelerate as the uncertainty weighing on the sector decreases.”

Margins Squeezed

St. Galler Kantonalbank AG agreed last week to sell parts of its Hyposwiss private bank, citing lower margins and rising costs. Julius Baer Group Ltd. purchased Bank of America Corp.’s Merrill Lynch wealth management units outside the U.S. last year. Safra Group, founded in the Syrian city of Aleppo in the 19th century, agreed to acquire the Rabobank Groep’s controlling stake in Bank Sarasin & Cie. in November 2011.

“We’re going to see more of that,” Mediobanca’s Wheeler said. “It’s a question of whether you can afford it, whether it’s making the returns or whether it’s there to facilitate something else within the group.”