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GENEVA, SWITZERLAND – Japan has announced its first trade deficit since 1980, Y2.49tn ($32bn), with Prime Minister Yoshihiko Noda saying it will take until 2014 for a turn-around. Analysts, according to the financial press, are gloomier about Japan’s short- to mid-term prospects for avoiding a current account surplus. The savings rate in the country has been falling, fuel costs have risen sharply in the past year and the trade balance has been hurt as well by a combination of the broader impact of the major earthquake at the start of 2011, floods in Thailand which have pushed down exports, and a trade deficit with China that is five times higher than in 2010.
Japan has historically had large trade surpluses.
Links to other sites: Bloomberg, Financial Times, RTE
ZURICH / BERN, SWITZERLAND – The Swiss National Bank is showing a consolidated profit of CHF5.8 billion for the first nine months of the year, thanks primarily to gold prices. The profit was achieved despite an over-valued Swiss franc that caused losses of CHF4.7 billion.
Other currency positions resulted in gains of CHF5 billion, giving the central bank a net currency position of CHF0.3b. The over-valued Swiss franc and intervention by the SNB, particularly in August and September, were the main factors in the bank’s currency situation at the end of nine months. The bank notes that at the end of the quarter, the US dollar was trading 3.1 percent lower than at the beginning of the year, and the euro 2.8 percent lower.
The SNB’s currency investments are 55 percent in euros, 25 percent in dollars, 9 percent in the yen, 4 percent in sterling, 4 percent in Canadian dollars and 3 percent in other currencies.
The price of gold at the end of September accounted for the bulk of the profit: it was around CHF47,089 per kilo, giving the bank a valuation gain of CHF5.0 billion. But the bank noted in a statement issued Monday 31 October that “the SNB result depends largely on developments in the gold, foreign exchange and capital markets. Consequently, strong fluctuations are normal, and only provisional conclusions are possible as regards the annual result.”
UBS bailout fund loan down by CHF4b to outstanding CHF7.9b
The stability fund, created for the government’s bailout of bank UBS in 2008, contributed CHF573 million in interest payments, to the central bank’s profits. “The loan to the stabilisation fund was reduced from CHF 11.8 billion (USD 12.6 billion) to CHF 7.9 billion (USD 8.8 billion), and the total risk exposure decreased from almost CHF 14 billion to around CHF 8.7 billion.”
Bern, Switzerland (GenevaLunch) – The Swiss government is increasing sanctions against Iran to the same level as those put in place by its main commercial partners, the government said Wednesday morning 19 January. The tougher measures were taken to ensure that Switzerland is not used by Iran to get around the stricter sanctions put in place by the European Union, in particular, in October 2010.
The list of persons whose assets are frozen is also being extended, the same day that the Swiss have moved to freeze assets of former Tunisian President Ben Ali and Laurent Gbagbo of Cote d’Ivoire, who has refused to give in to pressure from other countries to acknowledge he did not win his country’s recent elections.
Swiss exports to Iran were CHF700 million in 2010, mainly pharmaceuticals, machinery and agricultural products. Imports came to CHF41 million. The volume of trade fell by CHF63 overall, compared to 2009.
The new level of sanctions is also needed to give legal protection to Swiss companies operating internationally, according to Bern, as they now risk being caught between two levels of sanctions.
The London unit of Goldman Sachs has been fined £17.5 million for failing to disclose that it was under investigation for fraud in the USA by the US Securities and Exchange Commission (SEC) in the marketing of certain collateralized debt obligations.
The UK’s financial services regulator, FSA, fined the firm for controls weaknesses leading to the failure to disclose the information about the SEC lawsuit. Goldman settled the case with the SEC in July and agreed to pay $550 million.
Links to other sites: Bloomberg, Daily Telegraph
Federal budget for 2011 gets government approval
Government likely to weigh it down with VAT
Bern, Switzerland (GenevaLunch.com) – The Swiss Federal Council wants to see a single value-added tax (VAT, called TVA in French) rate of 6.2 percent, it said Thursday 24 June. An earlier plan by the ruling council for a single rate VAT, a project dear to Hans-Rudolf Merz, finance minister, failed earlier when both houses of parliament made substantial changes to the proposal.
The new proposal, which now goes to parliamentary committees for consideration, would do away with 21 of the 29 exceptions to the tax, and would add or increase the rate of the VAT tax on medicine and medical treatments, educational training, food and non-alcoholic beverages.
Negative reaction from a number of consumer and industry groups has been swift and largely negative, although economiesuisse and hotelleriesuisse support the change, which Merz argues is necessary to boost the economy.
The complexity of the current VAT system carries a cost and simplifying it would provide 1 percent growth.
The Swiss government’s proposal comes just days after the British government increased the VAT to 20 percent.
2011 budget carries weight of extra VAT charge
The government also approved the 2011 federal budget plan Thursday: revenues will go up 3.8 percent and expenditures 3.3 percent, but the strong growth includes a short-term additional VAT charge.
Revenues would be 2.3 percent and expenditures 1.9 percent without it. The Swiss voted for the additional VAT in 2009, to cover the deficit of the federal disability insurance fund.
Links to other sites (Fre): economiesuisse, hotelleriesuisse, Le Temps, TSR and government press release on the proposed VAT change
Lausanne, Switzerland (GenevaLunch) – The University of Lausanne’s Faculty of Business and Economics, the HEC in Lausanne and the Swiss Finance Institute are joining with the Tepper Institute at Carnegie Mellon University, Pittsburgh, USA, to offer a dual-degree executive MBA in asset and wealth management. The programme starts in 2011 and offers an EMBA from the American university as well as one from the two Swiss universities.
The new EMBA programmes are designed for is designed for private and institutional investment managers, private banking relationship managers and other investment professionals.
Michael Ambuehl, Switzerland's State Secretary for International Financial and Tax Matters
Bern, Switzerland (GenevaLunch) - Michael Ambuehl has been named Switzerland’s State Secretary for International Financial and Tax Matters, head of a new secretariat within the Federal Finance Department. Ambuehl is probably best known as the man who negotiated the UBS arrangement with the United States Justice Department in early 2009. The new secretariat “will serve the purpose of reinforcing Switzerland’s international position in financial and tax matters,” the official announcement states.
The new office will be responsible for Switzerland’s interests in the International Monetary Fund and in the Financial Stability Board, and it will “actively participate in international efforts to combat financial crime. Moreover, it will analyze developments in the financial markets in Switzerland and abroad, and will further develop legislation concerning the financial sector.”
Ambuehl is thus charged with overseeing Switzerland’s ambitious project to play a more aggressive role in international finance and tax matters, as it tries to shed a reputation as a tax haven, which the Swiss say is largely a misperception.
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
Foreigners at top end out-earn Swiss
Neuchatel, Switzerland (GenevaLunch) - Top managers’ salaries in Switzerland have continued to rise “sharply”, especially in the financial field, since 2006, and the spread between Switzerland’s lowest paid workers and highest increased, a preliminary government statistical report shows. Well-qualified foreign workers and those with long-term C residence permits out-earn their Swiss counterparts while foreigners with lower qualifications and some border workers earn less than Swiss people in comparable jobs.
Salaries, bonuses for insurers, bankers up sharply 2006-2008
The Swiss Statistical Office Tuesday 17 November issued its preliminary report on salaries in 2008. Salaries remained mostly stable, it shows, with the financial sector an exception: salaries and bonuses both rose, with top managers’ salaries increasing 38.8 percent from 2006-2008, compared to an 11.6 percent increase for top managers in all other fields.
Will there be enough money for next season?
Switzerland (Le Temps, Fre) – The world of ski competitions is suddenly feeling the pinch of the global economic downturn and in particular falling sales at ski manufacturers, the sport’s biggest sponsors. The Ski Racing Suppliers (SRS) Association, meeting in Zurich 12 May, called the situation “precarious” for everyone, according to Le Temps, which carries a lengthy article on the financial problems faced by skiers and federations. Rossignol, a major supporter of events and athletes, announced last week that it will cut its athletes’ salaries by 50 percent and support for events by 30 percent, but its cost-cutting measures are being matched or considered by other manufacturers.
The debate raging in Switzerland this week over bonuses UBS might pay employees pales next to the amounts paid out by financial groups in New York in 2008: $18 billion, a report from the state comptroller lists. The New York Times calls it the six largest such payout on record and says it is seen as “outrageous” and raises transparency and governance issues for many “experts, and indeed many ordinary Americans.”
Adolf Merckle, called by the Financial Times one of Germany’s wealthiest people and owner of dozens of companies, apparently committed suicide when he was hit by a train near his Heidelberg area home Monday night. He had reportedly lost several hundred million euros “in trading related to Volkswagen shares” and was in difficult negotiations with banks to save his companies.
Zurich, Switzerland (GenevaLunch) - Credit Suisse Group is confirming Q3 losses in line with the announcement made on 16 October.
Title: Wealth management seminar
Location: Geneva, Mandarin Oriental hotel
Description: How to make money in volatile markets
Start Time: 18:00
Date: 2008-10-02
