Protestors make their presence felt in Toronto in worst of a week’s clash with police
There won’t be a master plan that all G20 countries will follow to ensure economic recovery: the group of the world’s 20 largest economies met in Toronto over the weekend and agreed that a diversified set of solutions makes the most sense for global economic recovery. Overall, however, they agreed to halve European government’s deficits by 2013 and to push for higher capital requirements for banks.
Protestors clashed with police Sunday 27 June, the worst in a week-long series of marches and meetings against world leaders’ management of their economies. The Toronto Sun reports that what started out as a peaceful march by 4,000 people suddenly turned into a riot, with police cars set on fire and heavy destruction of buildings and other property.
Links to other sites: Bloomberg, Financial Times, Toronto Sun
Video, Reuters
©2010 Chappatte, distributed by Globe Cartoon. More cartoons on Chappatte’s web site. Geneva-based Patrick Chappatte works for the International Herald Tribune, for Geneva newspaper Le Temps, and for NZZ am Sonntag. All cartoons reproduced with permission.
The Irish government Tuesday 30 March announced a series of measures to prop up its ailing banks, which have not yet come out of the global financial crisis. AIB shares were down 20 percent and Bank of Ireland shares fell by 10 percent. The popularly dubbed government “Bad bank” took over €81 billion in bad housing loans Tuesday, about one-fifth of Ireland’s bank loans, while political debates centred on the growing nationalization of the banks.
Links to other sites: Financial Times, Irish Times
Update Zurich, Switzerland (GenevaLunch) - Credit Suisse has confirmed weekend Swiss media reports that it is restricting travel for staff in Germany, following an announcement Friday by the German government that it is investigating 1,100 cases of tax evasion and that the investigation includes looking at the role played by Credit Suisse staff. “We already have restrictions on travel in place and now these are being applied very strictly in the case of Germany,” a Credit Suisse spokesman told Reuters Sunday. A German official told Swiss magazine Blick the accounts could be worth an estimated €1.2 billion.
Germany has been threatening for months to use information it purchased in 2008, stolen from a bank in Liechtenstein, LGT, to investigate tax evasion cases. In recent weeks tensions have risen between Germany and Switzerland over Germany’s efforts to buy data held by France that was stolen from HSBC in Geneva.
Background, GenevaLunch
The auditors who sign off on corporate accounts are a group who generally remain in the background of public debates over failures, and those who have handled banks’ book during the recent global financial crisis are no exception, but a 12 March report on Lehmann looks set to change this. Anton Valukas was appointed by a US court to provide a report after Lehmann’s 2008 bankruptcy, the largest in US corporate history. Among Valukas’s findings, detailed in the 2,200-page report: Ernst & Young, one of the Big Four accounting firms, did not live up to professional standards. The Financial Times argues that ‘the claims against E&Y, although exceptional, give grist to a growing lobby questioning the purpose of auditors in providing investors with a true picture of the financial health of a company.”
The scrutiny by world media of Ernst & Young following Friday’s report was followed Monday 15 March by the news that Saudi Arabia has pulled the auditing company’s securities license, according to the Wall Street Journal.
Links to other sites: Ernst & Young, Financial Times, Guardian/Observer, JDSUpra legal blog, New York Times, UK Reuters UK/Yahoo
Bern, Switzerland (GenevaLunch) - The Swiss government says it is instructing the Federal Finance Department to come up with solutions to “prevent new, undeclared funds from coming to Switzerland.” The governing Federal Council stated after a special session Wednesday 24 February that focused on the Switzerland’s role as a financial centre that it is “against attracting undeclared funds from overseas” and that it will continue to work on the “regularization” of existing funds that have not been declared to their home governments.
The statements are the strongest sign yet that Switzerland intends to curb banking activity that involves undeclared money, but the council emphasized that any solutions must “at the same time ensur[e] that privacy is safeguarded.”
Alexandria, Virginia, USA (GenevaLunch) - Details are emerging of the case of Dr Andrew Silva, who pleaded guilty 16 February in US District Court in Virginia to “conspiring to impede the United States” and to making false statements. Silva inherited $250,000 from him mother in 1997. The money, never declared to the US tax authorities, the IRS, was in a British-owned bank in Switzerland. The money grew to $268,000 by the time he tried to take the money out in 2009 when the bank said it was closing his account, a time when a number of banks in Switzerland began to close accounts held by US citizens both outside and in Switzerland. to avoid problems with US authorities.
The US Justice Department Tuesday issued a press release on his case, noting that Silva, a nose and throat specialist and surgeon, could face up to 10 years in prison and a maximum fine of $500,000. He was released on his own recognizance.
“We are capable of thwarting offshore banking schemes because of the increased cooperation among ICE, Postal Service, and the IRS,” says Neil MacBride, US Attorney for the Eastern District of Virginia says in the Justice Department release. “The tax charges in this case came to light because agents caught Mr Silva structuring cash to avoid reporting requirements, and that kind of coordination is making it possible for us to discover Americans who conceal their wealth overseas and make them pay for their actions.” Structuring cash is a term that describes bundling a large amount into several smaller ones, all under $10,000, to slip them into the US to avoid detection or without having to declare the money to customs authorities.
The Justice Department points out that “United States law prohibits individuals from structuring mailings of US currency into the United States in amounts less than $10,000 if the purpose of the structuring was to evade the requirement to file a CMIR.” The CMIR form’s longer name is: FinCen Form 105, Report of International Transportation of Currency or Monetary Instruments, and it must be filed with the US Bureau of Customs and Border Protection.
The government’s description of how Silva tried to get the money out of Switzerland:
All quiet on the Swiss front over Germany’s threat to buy stolen bank data
Update 10:40 Bern, Switzerland (GenevaLunch) – The Swiss government has issued a statement following a speech Monday by German Chancellor Angela Merkel where she said that Germany is ready to buy stolen Swiss bank data. Bern says in a brief note that Germany’s finance minister, Wolfgang Schaeuble, telephoned Swiss Federal Councilor and Finance Minister Hans-Rudolf Merz Monday. Merz told his German counterpart that Switzerland will not provide judicial assistance for requests which are based on stolen data. He added that Switzerland is, however, prepared to work more closely with Germany to unmask fiscal fraud, within the context of a revised double taxation treaty.
Switzerland has in recent months negotiated more than a dozen such treaties with other countries. It is currently in negotiations with Germany for a new treaty.
Merkel’s speech was made after Merz was contacted by Schaeuble by telephone to say that the German government has been approached with an offer to sell information on 1,500 bank clients for abut CHF3.5 million.
US President Barack Obama’s announcement 21 January that he intends to limit the size of some lucrative activities by American banks was cheered by France, but Asian markets have reacted negatively and the dollar lost gains it made earlier in the week. France’s Finance Minister Christine Lagarde told French media that the US was finally following her country’s lead and regulating markets for greater stability. Asian stock markets fell for a fifth straight day, with fears that China will raise interest rates coupled with concern that US banking curbs will weaken that country’s economic recovery.
Links to other sites: Bloomberg, Market Watch, NPR, Reuters,
New rules from Basel for banks worldwide
Basel, Switzerland (GenevaLunch) - Central bank governors, meeting in Basel Sunday 10 January, “welcome the substantial progress” made by the Basel Committees on Banking Supervision (BCBS), they said in a press release issued Monday. The group has charged the BCBS to come up with details rules, a set of tougher standards for banks, by the end of 2010, in response to the global banking crisis of 2008-2009. The standards would affect banks worldwide.
The new regulations were outlined in a report by the Committee in mid-December 2009.
Swiss army knives and more, still selling
Geneva, Switzerland (GenevaLunch) - The canton of Geneva moved out of its recession and into growth by the second quarter of 2009, six months ahead of the rest of Switzerland, and it now looks set to have a GDP (gross domestic product) of CHF45 million, growth of 0.5-1 percent in 2010, predicts the BCGE (Banque Cantonale de Geneve). The growth is closely linked to Geneva’s strong ties with Asian trading partners, but retail businesses have remained strong throughout the recession, and consumers are expected to lead the way with 3.5 percent growth in this area, followed by services (health, education, government and semi-public business), which account for 20 percent of cantonal GDP.
Banks are expected to show zero growth and therefore have a neutral impact on the canton’s GDP growth figures next year.
Links to other sites: BCGE, Tribune de Geneve
Basel, Switzerland (GenevaLunch) – Some of Switzerland’s banks and insurance companies, all multinationals, could well be among those identified by the Basel-based Financial Stability Board as companies that need more regulation because of inherent risks. But the FSB denies Tuesday 1 December, that a Monday report in the Financial Times which lists companies is wrong and that it does not have such a list because such risks are situation-specific and change over time.
Natural catastrophe losses like to be down sharply in 2009
The good news for insurers is that catastrophes are likely to cost them far less in 2009, down by 59 percent compared to 2008.
Bern, Switzerland (GenevaLunch) – The Swiss Financial Market Supervisory Authority (Finma) says it wants banks’ remuneration policies to be more closely aligned with the long-term health of the institution. They should not be an incentive to take risks which may undermine the company. But it will not cap bonuses. Finma announced its new circular Wednesday 11 November. The new regulations take effect 1 January 2010.
Finma says that variable remuneration, or bonuses, should reflect an employee’s stake in the success of the company, in the company’s overall performance, and should reflect the risks the company takes. Finma encourages senior employees’ bonuses to be deferred in order to ensure that the company’s health is aligned with their remuneration.
Bern, Switzerland (GenevaLunch) – Bank deposits in Switzerland up to CHF100,000 will be covered in case the bank gets into trouble, and depositors should be paid within 20 days. The Swiss government proposal foresees a two-tier system: a public guarantee fund with CHF9.75 billion to be funded by the banks in the first tier. Then, should the fund be exhausted, the Swiss government will either pay out the necessary funds or guarantee the difference. In either case, banks will pay a yearly premium towards the additional funding.
The funds could also be used under certain circumstances to ensure essential business continuity for a troubled bank, according to the Swiss Federal Department of Finance (FDF) 14 September.
The current law covering deposits expires in 2010. It was a stop-gap measure introduced in late 2008 because of the banking crisis. The government proposal would make the guarantee permanent. It now goes through the consultative process until 31 December 2009.
Bern, Switzerland (GenevaLunch) – Contrary to what was widely reported in the international media Sunday France did not obtain 3,000 names of likely tax dodgers from Switzerland as the result of a new tax treaty signed 27 August, the Swiss federal finance department told news agency ATS Sunday. The treaty must be approved by the Swiss parliament before it enters into effect, a matter of several weeks.
Hans-Rudolf Merz, Swiss president and finance minister
Bern, Switzerland (GenevaLunch) – Swiss Finance Minister Hans-Rudolf Merz signed a new double-taxation treaty with his French counterpart, Christine Lagarde in Bern 27 August. The new treaty is the thirteenth Switzerland has signed since March, after Luxembourg and Denmark.
It brings Switzerland in line with the OECD standards for administrative assistance in cases of tax fraud, according to the Swiss government. Lagarde said in Bern that banking secrecy can no longer be used by one of the two states to refuse to provide information.
Nine US banks paid their employees bonuses that exceeded the banks’ net income in some cases, a report by New York Attorney General Andrew Cuomo details. The banks all received government aid in 2008. The report says banks’ compensation policy “has become unmoored from their financial performance”. Cuomo writes that “when the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well.” The nine banks received $125 billion in bailout money under the Troubled Asset Relief Program (TARP). Most of the banks have paid the money back. NYT, Reuters
Geneva, Switzerland (GenevaLunch) – One of three options for the future of Switzerland’s banking secrecy could be to link it to an indirect tax, Swiss President Hans-Rudolf Merz, who is also the country’s finance minister, told a press conference in Geneva Thursday afternoon, saying it is the option he favours.
Citigroup added to the gloomy economic news that started Monday with an announcement of recession underway in Japan by telling investors that it will reduce its workforce to 300,000 people but cutting 50,000 jobs. In the past four quarters, reports CNN, the bank has trimmed 23,000 jobs.
Zurich, Switzerland (GenevaLunch) – UBS shares briefly slipped to an all-time low of CHF13.88 Monday after it announced its new compensation package, with no bonuses for bank officials in 2008 and stricter rules for the future.
The Financial Times headline story Monday morning was that Wall Street could lose another 70,000 jobs as banks prepare their 2009 budgets, most of which will be announced at the end of November. The worldwide financial sector has already lost 80,000, says the paper.
Zurich, Switzerland (GenevaLunch) - Credit Suisse Group is confirming Q3 losses in line with the announcement made on 16 October.
France has unveiled its bank rescue plan, with €10.5bn earmarked for six banks in an effort “to shore up their balance sheets,” reports the Financial Times.
London, England and Zurich, Switzerland (FT) – The UK prime minister, Gordon Brown, is working closely with a subsidiary of Credit Suisse, which beat out several other banks including UBS, for the mandate to advise the UK government on bailing out its three biggest banks.
