BERN, SWITZERLAND – The Swiss financial surveillance body Finma will be keeping a closer eye on Swiss banks, particularly the two big banks UBS and Credit Suisse, under rules approved by the governing Federal Council Wednesday 23 May. Finma will work more closely with corporate auditors and strengthen its field team with the goal of keeping a close eye on banks’ risks.
Finma was established in 2009 shortly after UBS was bailed out by the federal government. Its activities cover the entire financial industry. Under the new rules, drawn up based on Finma’s initial three years of experience, banks have an ad hoc Finma unit that will work more closely with the central bank and bank surveillance groups abroad to keep a close eye on the banks’ markets activities.
Supervisory Instruments and the Organisation of FINMA, report prepared for the Federal Council, November 2011
Credit Suisse, Paradeplatz, Zurich
ZURICH, SWITZERLAND – Credit Suisse showed a first quarter 2012 return to positive net income, Switzerland’s second largest bank said Wednesday 25 April. The results were announced before markets opened.
Chief executive Brady Dougan said in a statement that the bank had a good start to 2012, and the figures were indeed better than analysts’ predictions of a loss.
The net income of CHF44 million was an improvement: Credit Suissse in the fourth quarter of 2011 suffered its first net loss since 2008.
But the figures were far off the CHF1.14b reported in Q1 2011, until “normalized” figures are compared, showing the bank with income of CHF1.35b. Normalized figures don’t include writedowns o f$1.6b that reflect the bank’s cost-cutting programme, with restructuring and bonus cuts.
Dougan’s salary was cut in half in March 2012.
“We began to see the effects from the measures we announced in mid-2011 to evolve our business model and cost structure and we benefited from an improved market environment, Dougan says. “Our reported results were adversely impacted by accounting driven fair value losses due to tightening of our own credit spreads.”
BERN, SWITZERLAND – Journalists have been hounding the Swiss government for months about the number of US clients of Credit Suisse targeted by the US Justice department and Wednesday evening the information came out, but through a back door: it was tucked into a budget note from the Federal Council. The number of clients whose data the bank turned over to Swiss authorities in order for the government to share them with US authorities is 650, and the expected cost is CHF4.7 million, a tab the government expects the bank to pick up
In addition, the council is requesting CHF1.1m to cover the end of the work linked to a 2009 agreement between Switzerland and the US concerning tax evaders who were clients of UBS.
What isn’t clear from the budget message is where the US and Switzerland are with a political agreement that would cover all Swiss banks, but it appears that the deadline to review the Credit Suisse cases, which is not provided, is linked to the larger discussion.
The information was part of a request by the Federal Council (cabinet) to parliament to approve 13 additional credits, beyond the basic budget, for CHF90 million. Two of the largest projects are CHF14 million for European research organizations including CHF12.2m for Cern, and CHF60 million to encourage technology and innovation in the face of the strong franc. CHF7 million is earmarked for a new alarm system to alert the population and, last item on the list, CHF5.8 million to “cover the cost of the additional work done for the administrative assistance request from the United States, an extra burden linked notably to the Credit Suisse affair.”
The discreet budget item: a request for CHF5.8m to cover the cost of office space, specialists and other expenses linked to the Credit Suisse affair with the US Justice Department
The budget request notes that the US request for administrative assistance was made 26 September 2011 but that work had already begun a year earlier to prepare for such requests to enable Swiss authorities to move more quickly on grouped requests, based on the experience with UBS.
The federal Service d’échange d’informations en matière fiscale (SEI), the office within the tax department which handles information requested by other governments, “was reinforced by taking on temporary staff, lawyers and administrative staff, as well as external collaborators (who had already been hired for the [UBS case]. Additional office space had to be hired and the IT infrastructure had to be adapted to handle the new situation. The additional credits requested (CHF4.7m) must cover the extra costs incurred by the administrative assistance request and concern for the most part (CHF2m) the cost of consultants.”
Credit Suisse will be billed for the total cost, says the Federal Council.
GENEVA. SWITZERLAND – A Swiss-based currency trader, Kai H, lost a case Monday 26 March where he claimed investment bank JP Morgan owed him millions. He sought 10 times what the bank said it promised to pay him when it hired him in 2010. The trader filed the claim in London’s Queens Court division of the high court based on a typographical error in his salary contract.
KH, who is reported by Bloomberg to have been working at Swiss bank UBS, signed a contract in June 2010 with the New York-based firm to relocate to Johannesburg, South Africa, for a salary of 24 million rand (about US$3.1 million) instead of the 2.4 million rand that had been agreed, according to the bank’s account.
After realizing the mistake, Kai did not show up for work. JP Morgan retracted its offer soon after Kai began legal proceedings.
Judge Henry Globe in London, who heard the case, reportedly stated Monday (there is no written record of his ruling) that Kai had taken a “commercial risk of accepting the offer, knowing full well that the figure was an error”.
Swiss financial publication Finews, which picked up the story from Bloomberg, says no one seems to know if the trader has found work since being laid off by Credit Suisse as part of a batch of job cuts in late 2011. Before that he was reportedly unemployed after filing his lawsuit.
ZURICH, SWITZERLAND – The KOF, the economic research institute at the University of Zurich has upgraded its forecast for the Swiss economy in 2012, noting that the 0.8 percent rise hides a stronger upward swing towards the end of the year.
The group notes in a press release: “Private consumption will make the biggest contribution to growth. Exports will come out weaker due to the effects of the strong franc and stagnation in Europe. The labour market looks robust, unemployment figures will remain at 3.2 percent, a very low level by international standards.”
The outlook for exports is more negative than figures released Thursday by the federal statistical office imply. “The outlook for the export economy is mixed,” reports the KOF.
“The companies involved–foremost in the tourism industry–have to live with a strong currency that will squeeze margins.
Tourism (–1.4%) and other service exports (–0.7%) will shrink again this year. Growth in exported goods (1.5%) will be lower than last year (6.2%). The overall result is a growth in exports of 0.8%.“Imports will grow faster, 3.7%, whereby the trade balance with the GDP will be negative in 2012. Stronger growth in exports (4.7%) is also expected for the next year in the wake of the upswing, but the rate will still lag behind imports (7.9%).”
Swiss economy, 2012 forecast, source: KOF economic research institute in Zurich
CS bank bosses find pay deals down
Credit Suisse is cutting the pay packages of senior managers, with chief executive Brady Dougan receiving CHF5.8 million, less than half of what he earned the previous year. Overall, compensation packages at the bank are down from CHF14.6 million in 2010 to CHF13.2m in 2011, with the bank saying in February that it was cutting its bonus pool by 41 percent after seeing profits fall 62 percent last year. The Group issued its annual report 23 March.
Brady Dougan, Credit Suisse CEO
ZURICH, SWITZERLAND – Credit Suisse Thursday 9 February reported a net loss of CHF637 million for the fourth quarter of 2011, significantly worse than many analysts’ expectations, according to Bloomberg. Full-year figures remained in the black, with net income of CHF1.95 billion, but the profit was down by 62 percent, compared to a net profit of CHF5.2b in 2010.
Chief executive Brady Dougan summarized the result for Q4 as “disappointing”, saying “It reflects both the adverse market conditions during the period and the impact of the measures we have taken to swiftly adapt our business to the evolving market and regulatory requirements.”
It is the bank’s first quarterly loss since 2008 and in the statement issued Thursday the bank attributes it to “realignment costs of CHF414 million from cost-efficiency measures, and CHF567 million from businesses we are exiting and the reduction of risk-weighted assets in our Investment Banking fixed income business.”
The bank’s private banking business was hurt by “significantly lower levels of client activity and higher expenses for legal matters and credit provisions”.
Private banking new money continued to flow in, with net new assets of CHF40.9 billion for the year, but the last quarter was CHF7.6b, mainly from emerging markets, indicating a slowdown.
State of talks with the US government
Talks with Swiss and US government officials are ongoing, Credit Suisse notes, over allegations that the bank acted illegally with wealthy US residents who were trying to hide their money from American tax authorities. “Credit Suisse is strongly supportive of a resolution acceptable to both the US and Switzerland. Credit Suisse continues to cooperate with the authorities both in the US and Switzerland to resolve this matter in a responsible manner that complies with its legal obligations.”
Swiss and US officials have indicated this week that they are anxious to resolve the situation, which one top official not directly involved in the talks described off the record as a top area of “tension” between the two countries.
CEO says costs incurred to prepare for new world where banks face new regulatory environment
Dougan says costs incurred to re-position the bank will pay off as it cuts losses from less profitable business areas.
“In mid-2011, we decided to aggressively reduce risks and costs. This decision was rooted in our belief that the market and regulatory environment is undergoing fundamental change, and that by embracing these developments and proactively adjusting our business model, we can position Credit Suisse to succeed in the new environment. The regulatory developments and the subdued market environment in the second half of 2011 have confirmed our views. The accelerated implementation of the risk reduction plan and our measures to exit businesses that are no longer expected to deliver attractive returns in the changed regulatory environment, as well as higher charges incurred due to the rapid execution of the cost reduction programs, led to negative impact of CHF 981 million in the fourth quarter of 2011.”
BERN, SWITZERLAND – Comco, Switzerland’s competition commission, has opened an investigation into more than 10 international banks and companies and the country’s two largest, UBS and Credit Suisse, for possible “collusion between derivative traders [that] might have influenced the reference rates Libor and Tibor. Furthermore, market conditions regarding derivative products based on these reference rates might have been manipulated, too.”
The investigation follows what Comco calls an application to its leniancy programme, or self-denunciation, without providing details of who provided the information. The investigation could take several months. The banks targeted by the investigation include: Bank of Tokyo-Mitsubishi UFJ, Citigroup Inc., Deutsche Bank Aktiengesellschaft, HSBC Holdings plc, JP Morgan Chase & Co., Mizuho Financial Group Inc., Rabobank Groep N.V., Royal Bank of Scotland Group plc, Société Générale SA and Sumitomo Mitsui Banking Corporation.
Libor, the London interbank lending rate and Tibor, in Japan, are rates set daily based on bank data, which serve as underlying lending rates. The Swiss National Bank defines Libor as:
“The Libor (London Interbank Offered Rate) refers to the interest rate for unsecured money market loans to prime banks. Each bank business day, specific banks report to the British Bankers’ Association (BBA) the interest rate at which they would be able borrow unsecured funds of a reasonable market size on the London interbank market shortly prior to 11 a.m. The relevant top and bottom-quartile interest rates are disregarded when fixing the Libor. An average is calculated on the basis of the remaining interest rates, and the figure obtained in this manner is fixed and published as the Libor for the day in question. Libor rates are fixed in different currencies and with varying maturities.”
The investigation comes three weeks after European Union anti-trust boss Joaquin Almina said the EU is stepping up its efforts to ensure that derivatives markets remain free and competitive. Antoine Colombani, spokesperson for the European Commission is cited by Bloomberg as stating in January that “Last October we carried out unannounced inspections at the premises of a number of undertakings active in the sector of euro interest rate derivatives based on Euribor benchmark rates,” but that it had not opened a formal investigation.
“Regulators in the US, UK and European Union have been examining how Libor is set, while Japan’s securities watchdog has probed Tibor,” according to Bloomberg.
Comco’s statement notes:
“The London Interbank Offered Rate (Libor) and the Tokyo Interbank Offered Rate (Tibor) are reference rates which are aimed at reflecting the interest rate level in the interbank deposit market. The British Bankers’ Association (for Libor) and the Japanese Bankers’ Association (for Tibor) calculate these reference rates on a daily basis, for a range of currencies, based on submissions by respective panel banks. Derivative traders working for a number of financial institutions might have manipulated these submissions by coordinating their behaviour, thereby influencing these reference rates in their favour. Moreover, derivative traders might have colluded to manipulate the difference between the ask price and the bid price (spread) of derivatives based on these reference rates to the detriment of their clients.”
Comco says that assessing ‘the effects of the alleged practises on Swiss clients and companies is one of the aims of the investigation”.
Sarah Meier, Didier Cuche, winners of best Swiss athletes of the year awards (photo: Alexandra Wey / Photopress for Credit Suisse)
ZURICH, SWITZERLAND – Some like it cold: Switzerland’s male and female athletes of the year, awarded the titles by Credit Suisse, are winter sports specialists.
Didier Cuche at age 37 is one of the longest-enduring top athletes in the country, still at the top of his ski form with World Cup titles in downhill and super-G.
Sarah Meier is the queen of ice, and at age 27 she says she is “living a dream” since winning the European Championship in Bern after being plagued for years by a foot injury.
Credit Suisse, Zurich
ZURICH, SWITZERLAND – US-based private clients of Swiss bank Credit Suisse will no longer be able to do offshore banking with the company, in a move that may signal one of the first steps by an international bank to deal with Fatca (Foreign Account Tax Compliance Act), new US financial regulations that are expected go into effect in 2014, although the bank emphasizes that the decision was taken as part of broader measures to streamline the bank’s operations.
Credit Suisse is folding its Zurich-based Private Advisors (CSPA) unit, a legally separate entity with 10 “relationship managers”, into its much larger US-based Private Banking unit, which has some 400 relationship managers.
Worldwide, the bank has 4,000 private bankers, half of whom are in Switzerland, Zurich newspaper NZZ reports.
Private Advisors is a Swiss securities dealer that is registered both in Switzerland and in the US as a broker-dealer and investment adviser.
The move was made primarily for cost-reduction reasons and to serve US clients onshore, spokesperson Alex Biscaro told GenevaLunch. “You can tell, just by looking at the number of managers, the cost [of running the unit]. You have to make sure that all the employees know all US laws”, including state laws for the client’s area of jurisdiction, he notes. A unit like this “probably needs to have a certain size”.
CSPA has always been small because it was created to provide a niche product for a niche client group. Clients were domiciled in the US and the idea was to offer them an offshore product, says Biscaro.
The bank has changed its strategy in the past decade, however, he notes, saying that the bank began to “exit offshore trading in 2008″.
ZURICH, SWITZERLAND – Renzo Gadola, former UBS wealth management senior banker, was given a sentence of five year’s probation last week in Florida after he was earlier found guilty of helping wealthy Americans evade US taxes by hiding their assets in offshore accounts.
It came out in a court document, “Motion for Downward Departure From Sentencing Guidelines“, filed 15 November that he cooperated with investigators by recording meetings with clients as well as turning over the names of other bankers who are suspected of criminal activity. The document requested that he be treated leniently in sentencing because of his cooperation.
Gadola began to work with investigators shortly after he was arrested, the document notes. He is credited by US media with leading US Justice Department investigators to other bankers who have reportedly helped clients defraud the IRS through Swiss banks. The information he supplied showed for the first time that cantonal banks in Switzerland may also have been involved in hiding US clients’ money.
Former UBS banker “wishes to continue” working with US Justice Department
Sergio Ermotti, new UBS Group chief executive
ZURICH, SWITZERLAND – UBS will have a new boss: Sergio Ermotti, 51, who has been the ad interim chief executive of Switzerland’s largest bank since 24 September, has been named to the post permanently, the bank announced Tuesday morning 15 November.
He replaced Oswald Gruebel, called in to turn the bank around in February 2009, who resigned in September following the discovery of the CHF2 billion loss at the hands of a rogue trader in London.
Kaspar Villiger, chairman of the board, has moved his retirement date up to 3 May 2012, at the bank’s next general assembly. Axel Weber, who was slated to be proposed as vice-chairman and to eventually step into the chairman’s role, is now being proposed to the assembly as chairman.
The bank’s board also confirmed its strategy, it announced, and details of this will be provided at a 17 November financial meeting.
Credit Suisse, which has been told by the Swiss government to hand over data on a number of American account holders suspected of fraud or major tax evasion in the US, received bad news from Moody’s, which has scheduled its credit rating for review, saying the bank’s recent profitability trends and restructuring process should be looked at:
ZURICH, SWITZERLAND – Sonntagszeitung in Zurich has reported, citing an unnamed source, that Credit Suisse is handing over client data for 130 customers to the Swiss government, at the request of the American tax service, the IRS. The federal government, which has demanded that the bank turn over the names immediately, according to the Swiss weekly, will review the names and data, and provide them to the US tax authorities once it decides they meet the criteria required for Switzerland to provide administrative assistance to the US.
Swiss procedure allows the clients a chance to appeal, a process that could well mean it takes several months for the IRS to obtain the information.
Credit Suisse has so far not confirmed the Swiss weekly publication’s numbers. Last week it said it was informing clients who are affected by the move.
In the sights of the IRS, but part of a much bigger picture
BERN, SWITZERLAND – Americans who create offshore shadow companies or foundations, clearly to avoid taxes and with the active help of a Swiss bank, could see their financial information shared with the IRS even if the US tax authority cannot provide their names, if parliament accepts recommendations of the upper house foreign affairs commission.
The commission agreed Thursday 10 November, in a 7 to 3 vote, to an amendment to the new double taxation treaty with the US, which parliament will consider in December. The amendment would allow group requests to be made: bank data could be given to US authorities without the US first providing a name and account number, in a very limited number of cases.
US, Swiss seek global bank solution, sooner rather than later
Meanwhile, the investigation into 11 Swiss banks by the US Justice Department continues. The US and Switzerland have been in talks for some time to find what Mario Tuor, spokesperson for the Swiss Tax Office calls “a global solution for all banks.”
There is no timeframe for finding such a solution, an official who asked not to be named has told GenevaLunch, but both sides say they want a solution sooner rather than later.
Switzerland has “made no offer to the US” over 11 banks
Tuor told GenevaLunch that Switzerland has made no offer for a lump sum payment, contrary to a Reuters “exclusive” story 3 November that mentioned a multibillion dollar settlement. Another Reuters reporter later quoted Tuor as saying Switzerland has not made an offer as part of the talks. He clarified to GenevaLunch Friday that no offer has been made by the Swiss, period.
In fact, says one official,who concurs, saying Switzerland has not made an offer, some people close to the case have discussed figures but these are far smaller than the several billion that Bloomberg and later, Reuters, mention.
The Reuters reporter in New York has qualified the Credit Suisse investigation by the IRS as part of a showdown between the two governments—a statement at odds with the Swiss government’s insistence on including in the new treatment the clarification that group requests can be made under some circumstances. “The move by the two Swiss banks to disclose American client names and account information is the latest event in a showdown between Switzerland and the United States over the withering tradition of Swiss bank secrecy,” according to reporter Lynnley Browning, who covers accounting and tax stories from the US for Reuters.
Browning repeated today, as news, information she says she gleaned a week ago from unnamed US “sources briefed on the matter”—despite it later being flatly denied by the Swiss government to another Reuters reporter in Zurich. Lynnley Browning, who has written articles for the New York Times in the past, frequently pitting the US against Switzerland as adversaries, writes 9 November that:
“Switzerland is trying to craft a deal with the United States that would cover its entire banking industry of some 355 banks. Switzerland had wanted a deal that covered accounts dating back to early 2009, when UBS AG , Switzerland’s largest bank, averted indictment and reached a $780 million deferred-prosecution arrangement with US officials. But the two letters from Credit Suisse and Clariden Leu suggest that US authorities are unwilling to accept a deal that would start with 2009 rather than the January 2002 date cited in the letters.”
Credit Suisse letters sent to clients at gov’t behest
Credit Suisse and its subsidiary bank Clariden Leu, this week sent out letters to some clients warning that their names will be turned over to the IRS, with Swiss government support, as a result of the investigations. Bloomberg reports that
“The IRS sought data for accounts owned through domiciliary companies in which clients are the beneficial owners, according to the letter. The Swiss Federal Tax Administration issued an ‘immediately executable’ order to the Zurich-based bank, which has no right to appeal, according to the letter. Taxpayers can consent to the SFTA handing over their account data to the IRS, or they can use the Swiss legal system to appeal a ruling by the SFTA that their account must be given to the IRS, according to the letter.
“‘Please be advised that Credit Suisse is not able to provide any information on whether or not information with respect to a specific account will be provided to the IRS,’ according to the letter, signed by managing directors Michel Ruffieux and Stephan Gussmann.”
The banks’ moves are being reported by some media outside Switzerland as a breakdown in Swiss bank secrecy but the information in the letters doesn’t reflect a change in practice which is based on the old 1996 tax treaty that allowed some group requests; the US reportedly has gleaned enough information from other cases to find patterns of fraud at 11 Swiss banks.
Catching major tax evaders in the future
Some US media are also incorrectly reporting that the amendment to the new treaty provides for an “automated” process. The treaty would simply clarify that some group requests could be accepted by Switzerland, a feature of the old 1996 treaty. The US is the only country to have such an agreement with Switzerland, according to Swiss officials.
“Tax fraud and the like” includes some cases of tax evasion
A significant change in the new treaty is that it will allow the US to request assistance in some cases of tax evasion and not just fraud.
The Federal Justice Department published a statement 31 March 2010 about the “amending protocol” of the new treaty that parliament will consider in December, noting that it “permits Switzerland to provide treaty assistance in cases not only of tax fraud, but also of continued and serious tax evasion.”
The commission included, in August, the preamble (see text) requested by the Federal Council that explicitly authorizes for the first time judicial assistance in a limited number of cases where American requests do not include a name and address. But there is a clear rider: the requests must be “proportionate” and “practicable”.
In other words, Bern continues to insist, fishing expeditions or mass requests for information are specifically ruled out. Switzerland remains firmly opposed to this, citing Swiss banking laws that protect privacy.
The amendment notes that the US must provide evidence of a “pattern of flagrant” behaviour and of a very serious effort either to defraud or to evade taxes involving “large sums of money”.
Amended treaty doesn’t provide catalog of suspicious behaviours
A minority of the foreign affairs commission called for a catalog of catalog to be drawn up that specifies what behaviour constitutes a pattern and is therefore considered suspicious and what is not, but the commission in the end voted against this. Le Temps in an article Friday morning points out that this could create legal problems in the future.
The amendment would apply only to the agreement with the US and not to other double taxation agreements, the commission’s chairman said Thursday evening.
The next step is for parliament to consider the commission’s recommendation, which calls for the treaty to be approved, with the amendment included.
The commission also recommended that parliament approve nine other double-taxation agreements as they stand, including those with France and the UK
Swiss federal government timeline of the UBS case and the double taxation treaty with the US
Credit Suisse says its job cuts are mostly outside Switzerland
Lausanne is feeling the pinch of the strong franc, with job cuts at Kudelski and now Bobst
LAUSANNE, SWITZERLAND – Machine tools manufacturer Bobst says it will cut 8 percent of its 5,300-strong workforce by 2013, as part of restructuring. Most of the 420 jobs that will be lost are in Lausanne while the company relocates some of its work. “Owing to the exchange rate situation and the need for market proximity, activities and functions with low added value can no longer be carried out competitively in Switzerland,” the company says in a statement issued Tuesday 8 November.” In addition to outsourcing non-core activities, “the job reductions are achieved mainly by discontinuing temporary and fixed-term contracts, as well as through early retirements and normal staff turnover.”
The firm also intends to introduce short-time working of 15-35 percent, the Swiss solution of partial unemployment, starting in January 2012, for six months to give the restructuring plans time to have an impact on the group’s financial situation.
The company must take “drastic measures” to remain competitive, chief executive Jean-Pascal Bobst says in a statement issued Tuesday 8 November.
Porto, Portugal, 2011. Where will the jobs come from?
GENEVA / ZURICH, SWITZERLAND – Credit Suisse Tuesday 1 November confirmed weekend rumours that it is cutting jobs, saying it will reduce its global staff head count by 3 percent (some 1,500 jobs), while Kudelski in Lausanne announced it will cut 270 jobs, most of them in Switzerland.
The ILO (International Labour Organization) in Geneva, in the runup to the G20 meeting in XX, says that 80 million jobs need to be created worldwide to return to pre-crisis levels, but it is likely that only half this number will be created.
“The new World of Work Report 2011: Making markets work for jobs says a stalled global economic recovery has begun to dramatically affect labour markets,” the ILO says in a statement issued Monday 31 October. “On current trends, it will take at least five years to return employment in advanced economies to pre-crisis levels, one year later than projected in last year’s report.”
See: ILO interactive statistical world map, unemployment
Swiss bank’s latest redundancies: now 7% of workforce leaving
Credit Suisse announced Tuesday 1 November that it is looking for new cost savings of CHF0.8 billion by the end of 2013, in addition to savings of CHF2 billion announced earlier.
ZURICH, SWITZERLAND – Ratings agency Fitch says 14 October it has lowered the credit rating of Switzerland’s largest bank, UBS, by one notch, from A+ to A, citing reduced backing by the Swiss government. The change was one of scores by Fitch, with several French and British banks also targeted. The agency notes that UBS no longer has stronger government support than Swiss competitor Credit Suisse, which has a AA- rating.
The Spanish government was also targeted, but by rating agency Standard & Poor’s, which dropped the country’s sovereign debt rating from AA to AA-, citing weak growth and in particular concerns over the country’s banks. Fitch had lowered Spain’s sovereign debt rating earlier in the week.
ZURICH, SWITZERLAND – Credit Suisse said Monday it is paying euros 150 million to settle a tax fraud dispute with the Duesseldorf, Germany tax office, heading off a court case. Switzerland’s other large bank, UBS, is reported to have lost $2.3 billion, higher than initially thought, in the fraudulent trading case that erupted last week when the bank called London police, who arrested one of the bank’s traders.
Oswald Gruebel, the head of UBS, told Der Sonntag over the weekend that he will not resign over the theft incident.
The Duesseldorf case brings to an end a saga that began with Credit Suisse offices in 13 German cities being raided after German officials from one state in 2010 bought stolen data from a Frenchman who had worked in the information technology offices of HSBC in Geneva.
Bank Julius Baer earlier in 2011 agreed to settle a similar case with Duesseldorf, for euros 50 million.
US pressure on Swiss for bank names accompanies Fatca, FBar pressure on overseas Americans
Paradeplatz in Zurich: Credit Suisse
ZURICH, SWITZERLAND – Two Swiss-German newspapers spilled the news Sunday 4 September that the US is pressuring Switzerland with a short deadline and legal threats over bank data related to Americans suspected of hiding taxable assets in Switzerland. SonntagsZeitung and NZZ write that the US is demanding that Swiss bank Credit Suisse and several other banks hand over the names of a significant number of bank clients by Tuesday 6 September.
The newspapers are basing their information on details that are reportedly part of a three-page letter written by US Deputy Attorney General James Cox to Swiss diplomat Michael Ambuhl, threatening legal action if US demands are not met to furnish the names of US clients who handed the banks $50,000 or more between 2002 and 2010.
The story is being widely covered by media outside Switzerland as part of a Swiss banks and “tax cheats” saga, an over-simplification of a situation that has many threads, only one of which is how wealthy Americans or green card holders hide their money abroad.
FATCA, FBar the new overseas American tax lingo
American Citizens Abroad is calling for US Fatca legislation to be repealed
The news comes as US citizens abroad grapple with the implications of two extended deadlines: a very short deadline extension to 9 September announced at the end of August by the IRS, the tax arm of the US government, to come forward if they have not filed FBar forms in the past, and the recent one-year extension to 2014 of implementation of the new Fatca (Foreign Account Tax Compliance Act) legislation.
Under Fatca, foreign banks will have to announce, to the US, assets of American citizens who are clients, whether they are based in the US and using offshore services or resident abroad and using the bank to handle daily banking needs, including regular payments such as rent or mortgages, salaries and pension funds or trusts that are their main source of income.
American Citizens Abroad, a non-profit group based in Geneva that works closely with both Republican and Democrat groups for American citizens living outside the US, says that Fatca is “using a bulldozer to go after an ant hill” and that the price to the US will ultimately be too high. The group wrote, in a 31 August letter to US Secretary of the Treasury Timothy Geithner and top US tax officials demanding that Fatca be repealed, that
“Fatca will provoke a serious backlash from foreign governments who find it unacceptable, and rightly so, that the United States unilaterally extend US law worldwide.
This is financial imperialism. At a time when the United States needs the cooperation of the rest of the world to help resolve its major domestic debt problems and to reinvigorate its economy, it is counter-productive and dangerous to provoke foreign governments and force their financial institutions to become the policemen of the IRS, by requiring that they spend billions of dollars in compliance for the sole benefit of the IRS, and to force them to break their own domestic laws to do so.”
Spotlight on Credit Suisse, but it’s not the only targeted Swiss bank
US approach contrasts with German tax collection deal
ZURICH, SWITZERLAND – There is not an official war open against Swiss banks, by the US Department of Justice, but continuing skirmishes, highlighted this week by Le Temps and the Financial Times, make it clear that peace is not around the corner, either. Officials from the two countries appear to be heading for another showdown, writes Zurich-based Haig Simonen at the British newspaper, just as Switzerland and Germany are on the verge of announcing that they have found a way forward with a similar problem of German citizens hiding money from their taxman in Swiss bank accounts.
Switzerland and Germany are expected to announce Wednesday 10 August that they have signed an agreement for the Swiss to withhold tax on Germans’ bank accounts in Switzerland while Swiss banks will pay a lump sum up front for tax revenues lost in the past by Germany. The new agreement would leave Swiss banking secrecy intact by Switzerland turning over the taxes collected without identifying account owners.
The New York Times describes the new agreement, as well as an upcoming one with Britain as putting a squeeze on tax evaders, in an article published late Tuesday.
The US is taking a more aggressive tack to uncover past tax cheats and a 2009 treaty with Switzerland covering a set number of accounts held by Americans at bank UBS looks increasingly like a one-off settlement. The DOJ 4 August announced yet another indictment, this time against Gian Gisler, a former UBS banker who left the company in 2008 and who now lives in Zurich. His indictment follows four against former Credit Suisse senior managers in late July that topped up four other ex-Credit Suisse indictments in February 2011.
According to the DOJ “While working at UBS and at two other Swiss asset management firms, Gisler had more than 38 U.S. taxpayer clients and allegedly opened and/or managed more than 60 hidden accounts on their behalf. Gisler left UBS in 2008 when it became public that UBS was the target of an IRS investigation, and moved to a Swiss asset management firm so that he could continue to assist his US taxpayer clients in hiding their accounts at other Swiss banks. When that firm ceased its private banking business, Gisler left for yet another Swiss asset management firm so that he could continue to engage in the same conduct.”
The Financial Times says six other banks, in Switzerland and Liechtenstein are now being investigated by the DOJ. “The US investigations have taken months to gather pace. But receipt of the names, along with thousands of voluntary self-declarations by US taxpayers, has widened the scope of the US inquiries. Although only 25 US taxpayers with undeclared Swiss accounts have been indicted so far – and the first case dates back to April 2009 – the pace is beginning to build.”
GENEVA, SWITZERLAND – Europe’s largest retail bank, HSBC in the UK, announced job cuts 1 August that will reached 30,000 by the end of 2013, joining Switzerland’s UBS and Credit Suisse, as well as other large banks that have announced major staffing cuts in the past two weeks as financial markets fail to bounce back as expected from the 2008-09 global economic crisis. Credit Suisse expects to cut 2,000 jobs and UBS has not yet confirmed the number it will eliminate.
The HSBC job cuts were announced along with financial results that show a 36 percent increase in profits to $9.22 billion from $6.76 billion a year earlier. The bank is preparing to meet higher capital requirements under new Basel III world bank regulations.
Business Week reports that HSBC’s proportion of profits from Asian business rose to 76 percent, up nearly 10 percent compared to a year ago, while the share of its expenses based in Asia were just over 46 percent. Job cuts will occur in its offices worldwide, but the bank is likely to be hiring in Asia.
BERN, SWITZERLAND – PostFinance, the financial arm of Swiss Post, continues to pull in new customers as the country’s two large banks cope with the fallout from legal problems with the US and a strong franc that is hurting their revenues. PostFinance Wednesday 27 July announced that it acquired 43,000 new customers in the first half of 2011 and 103,000 new accounts, bringing the totals to 2.7m customers and 4.2m accounts.
Customer assets totalled CHF90 billion.
Profits rose nearly 20 percent to CHF327 million and the company created 130 fulltime jobs, with plans to add another 50 before the year ends.
The positive performance contrasts sharply with gloomy news from the country’s two big banks. UBS Tuesday 26 July announced a 49 percent drop in revenues due in large part to falling income from investment banking’s weak performance with stocks bonds, commodities and currencies. The bank plans to cut costs, which will mean job losses, by up to CHF2b in the next two to three years.
Credit Suisse announced 15 July it is being investigated by the US Justice Department, which has indicted eight former employees for helping wealthy Americans hide money in Switzerland. The bank announces its first half 2011 results tomorrow, 28 July.
ZURICH, SWITZERLAND – The US Department of Justice (DOJ) 21 July extended an earlier indictment of four Credit Suisse former and present bankers to eight, for helping wealthy Americans evade US taxes. In a lengthy statement the DOJ notes that:
“Markus Walder, former head of North America Offshore Banking at an international bank headquartered in Zurich; Susanne D. Rueegg Meier, a former manager with the international bank; Andreas Bachmann, a former banker at a subsidiary of the international bank; and Josef Dörig, the founder of a Swiss trust company, have been charged with conspiring with other Swiss bankers to defraud the United States, the Justice Department and Internal Revenue Service (IRS) announced today. The four are charged in a superseding indictment together with four other defendants (Marco Parenti Adami, Emanuel Agustino, Michele Bergantino and Roger Schaerer) who were charged in an indictment returned on Feb. 23, 2011.”
The DOJ’s “superseding indictment” claims that “As of the fall of 2008, the international bank maintained thousands of secret accounts for U.S. customers with as much as $3 billion in total assets under management in those accounts. The conspiracy dates back to 1953 and involved two generations of US tax evaders including US customers who inherited secret accounts at the international bank.”
The list of charges is lengthy and a report last weekend by Tages Anzeiger that negotiations had broken down between Switzerland and the US over the DOJ’s investigation into Credit Suisse affairs now appears to have credence.
The US statement ends with the tag line: “A criminal indictment is only an accusation and a defendant is presumed innocent until proven guilty. If convicted, the defendants each face a maximum of five years in prison and a maximum fine of $250,000.”
Walder is the former head of North America offshore banking at Credit Suisse Group, and Rueegg Meier and Bachmann are former senior managers at the bank while Dörig, who trained at the bank, is a former board member of Arbitrium Financial Services in Zurich in addition to having created his own trust company, Dorig Partner AG.
New rules from Basel for banks worldwide
BASEL, SWITZERLAND – The word Basel means one thing to bankers this week: new capital requirements.
New regulations will mean that the world’s largest banks have to raise additional capital and Tuesday’s paper is designed in part to give investors guidelines for “calculating extra funds that the lenders must raise”, reports Bloomberg, which notes that “the Financial Stability Board also published separate plans to ensure the orderly winding down of failed banks and shield taxpayers from bailing them out”.
The Financial Stability Board and the Basel Committee on Banking, both of which are part of the Bank for International Settlements (BIS) unveiled details 19 July of the additional capital requirements that could apply to 28 banks “globally systematically important banks” that have been identified, in a document put out for consultation until early August.
The new formula for determining which banks are at what level of risk was promptly questioned by some of the world’s leading banks, which argue that the tougher capital requirements would endanger economic recovery by restricting their lending. Switzerland plans to implement even tougher standards and Sweden says it wants to do the same.
Bankers, however, say even the Basel III stringent requirements will push up the cost of lending.
News follows rumours of two big Swiss bank staff cuts
ZURICH, SWITZERLAND – Credit Suisse issued a statement Friday that it was formally notified 14 July that it is being investigated by the US Department of Justice (DOJ) for helping wealthy Americans avoid paying taxes through undeclared offshore accounts.
Four Credit Suisse bankers, only one of whom is still with the bank, were named earlier this year by the DOJ as the target of investigations, and Credit Suisse said it was cooperating with US authorities.
The new investigation follows one by the US government that led to UBS providing the names of more than 4,000 US clients under the terms of a special treaty between Switzerland and the United States.
The bank’s official statement:
As previously disclosed, Credit Suisse has been responding to requests for information, including subpoenas, in an investigation by the US Department of Justice (DoJ) and other US authorities.
The investigation concerns historical Private Banking services provided on a cross-border basis to US persons. As part of this process, on July 14, 2011, Credit Suisse received a letter notifying it that it is a target of the DoJ investigation.
It has been reported that the US authorities are conducting a broader industry inquiry. Subject to our Swiss legal obligations, we will continue to cooperate with the US authorities in an effort to resolve these matters.
Ed. note: the Financial Times carries a lengthy story with background
Rumors have been flying all week that both Credit Suisse and UBS are planning large job cuts, with the Financial Times saying Friday that sources close to the situation back this up, but for the moment both banks are refusing to comment on the stories.
Ayat Suliman’s brother brought an unexploded cluster munition into their house in Samarra, Iraq. The munition exploded and caused burns to form over 65% of Ayat’s body. In Iraq, the United States used at least 1,206 clusters, containing more than 200,000 submunitions; this number represents 4 percent of the total number of air-delivered weapons used by the Coalition (text, image: Magnus Fröderberg for Cluster Munitions Coalition)
BERN, SWITZERLAND – The Swiss government Monday 6 June agreed, as expected, to ratify the 2008 Convention on Cluster Munitions (CCM). It signed the treaty in Dublin in 2008, along with 106 other countries, but needed to take the convention through several stages before ratification.
A key step was the revision of Switzerland’s war material act of 1996 to add penal provisions. “This act will be complemented by a ban on cluster munitions,” the Swiss Federal Council said in a statement.
“There will also be a ban on the financing of prohibited war material. Such material already includes nuclear weapons, biological and capital weapons and antipersonnel mines. Now cluster munitions will be added to the list.”
Ratification would force banks to completely dis-invest in cluster munitions companies
The move comes 10 days after a report issued by Handicap International drew attention to what it called the “Hall of Shame” of banks that invest in companies which produce cluster munitions. The two large Swiss banks, UBS and Credit Suisse, figured on the list, along with 14 other Swiss financial institutions. Both vehemently denied that they finance cluster munitions, pointing out that many of the investments listed were made before they tightened their policies in 2010 to avoid future investments in the large conglomerates which are often behind the manufacturers.
The report says, based on publicly available information, that 166 financial institutions in 15 countries have financial interests in eight companies that produce cluster munitions.
Handicap International says progress has been made in the financing area, but far more needs to be done.
Switzerland spends CHF16 billion a year on demining
BERN, SWITZERLAND – The finance commission of the Swiss parliament’s lower house has given its approval to new rules that would require Switzerland’s two largest banks, UBS and Credit Suisse, to increase their capital bases substantially above the amount required by Basel III global requirements.
Basel III rules were established by the Basel Committee on Banking Supervision and have been the subject of heated international debate in recent months.
The change in Swiss banking law, proposed to parliament by the governing Federal Council (cabinet), went through an upper house commission Monday.
It will now be debated in both houses this summer and, if approved, could be implemented starting in 2012, with a six-year period to gradually implement it.
The Swiss National Bank has thrown its support behind the tough new Swiss law, which was written after the government’s 2008 bailout of UBS during the global financial crisis.
Zurich, Switzerland (GenevaLunch) – ABB‘s financial report for the first quarter of 2011, published Wednesday, is upbeat, with a 25 percent increase in orders for the industrial engineering multinational, while net income rose 41 percent to CHF655 million.
ABB robotics packing furniture panels (photo: ABB)
Earnings before interest and taxes (EBIT) increased 43 percent to approximately $1 billion. Company head Joe Hogan attributes the solid performance to lower costs and successful targeting of growth areas.
Credit Suisse published its results, the day after UBS, showing net income of CHF1.1 billion, in line with analysts expectations, with net new assets of CHF19.1b. Income was down 45 percent compared to a year earlier, but up 35 percent compared to the fourth quarter of 2010.
The weaker performance compared to a year earlier was due, according to chief executive officer Brady Dougan, to “own debt and stand-alone derivatives relating to own funding liabilities” as well as to the franc’s continued strength against the dollar.”
Both net income and new inflows of money were lower for Switzerland’s second largest bank than for UBS.
Credit Suisse, Zurich
Zurich, Switzerland (GenevaLunch) – Four bankers who work for Credit Suisse have been indicted in eastern Virginia in the US on charges of conspiring with other bankers to defraud the US government, its justice department and the IRS tax arm of the government. The Department of Justice (DOJ) press release does not name the bank, but Credit Suisse has confirmed the information to TSR, Swiss public television, and other Swiss media.
The four include a Geneva banker, Marco Parenti Adami, and three others, Emanuel Agustino, Michele Bergantino and Roger Schaerer.
Parenti Adami is a senior manager whose several duties include responsibility for North American clientele for French-speaking Switzerland at Credit Suisse, where he has worked for 17 years.
The DOJ statement says:
“According to the indictment, the defendants and their co-conspirators solicited U.S. customers to open secret accounts because Swiss bank secrecy would permit them to conceal from the IRS their ownership of accounts at the bank and other Swiss banks. It is further alleged that they provided unlicensed and unregistered banking services and investment advice to customers in the United States in person while on travel to here, including at the international bank’s representative office in New York City and by mailings, e-mail and telephone calls to and from the United States.
“The indictment further alleges that the defendants and their co-conspirators caused U.S. customers to travel outside the United States, to destinations including Switzerland and the Bahamas, to conduct banking related to their secret accounts; opened secret accounts in the names of nominee tax haven entities for U.S. customers; accepted IRS forms that falsely stated under penalties of perjury that the owners of the secret accounts were not subject to U.S. taxation; advised U.S. customers to structure withdrawals from their secret accounts in amounts less than $10,000 in an attempt to conceal the secret account and the transactions from American authorities; and advised U.S. customers to utilize offshore credit, and debit cards linked to their secret accounts and provided the customers with such cards, including cards issued by American Express, Visa and Maestro.”
Credit Suisse, which says it is cooperating with the DOJ in the investigation, insists that it is not the target of the IRS. But the DOJ statement notes that “As of the fall of 2008, the international bank maintained thousands of secret accounts for customers in the United States with as much as $3 billion in total assets under management in those accounts. The conspiracy dates back to 1953 and involved two generations of U.S. tax evaders including US customers who inherited secret accounts at the international bank.”
TSR points out that the case against Switzerland’s other major bank, UBS, began in a similar way, with charges against a small number of bank managers before it escalated into a demand by the DOJ for data on thousands of Swiss bank accounts.
The bankers, if found guilty, could face up to five years in prison and fines of $250,000 each.
Link to other sites: Bloomberg, US Department of Justice, TSR (Fre)
Zurich, Switzerland (GenevaLunch) – An employee of Credit Suisse was jailed some time ago for suspicion of selling stolen data from his bank to German tax authorities, Tages Anzeiger reports.
According to TSR, which has picked up the story, a straw man, or intermediary, initially suspected and arrested in 2010, hung himself in his prison cell in Bern. Details remain sketchy, however, but it appears that the men were traced after a German lawyer accidentally included some information about them in correspondence with lawyers for customers of the bank whose names were on the CDs with the stolen data.
Bern, Switzerland (GenevaLunch) - Switzerland’s two biggest banks, UBS AG and Credit Suisse Group, need to increase their capital reserves beyond international standards, said on 4 October, a committee of public-private experts appointed by the Swiss Federal Council to address the issue of “too big to fail.”
The Committee of Experts believes that both banks are indeed “too big to fail,” but that measures should be put in motion to prevent any possible collapse (not only of the banks but of the Swiss economy).
The new proposal, backed by the Swiss National Bank, SNB, and the country’s financial regulator Finma; goes beyond the Basel III rules agreed to last month by the 27 member countries of the Basel Committee on Banking Supervision.
The Basel III rules establish reserves of 7 percent in common equity and 10.5 percent in total capital, while the new proposal require much higher reserves by 2019; 10 percent and 19 percent respectively.
The committee also proposed specific oversight measures in core areas including liquidity, risk diversification and organisation.
