ZURICH, SWITZERLAND – UBS, Switzerland’s largest bank, posted a full-year net profit of CHF4.23 billion, compared to CHF7.5b in 2010. The bank’s revenues were up in some areas and new money under management grew strongly, up CHF42.4 billion for the year, showing a turnaround in consumer confidence.
But profits were hurt by fourth quarter losses in investment banking due to stagnant market conditions, with a significant slowdown in trading stocks and bonds. The bank warned investors that the first quarter of 2012 could prove difficult:
“As in the fourth quarter of 2011, ongoing concerns surrounding eurozone sovereign debt, the European banking system and US federal budget deficit issues, as well as continued uncertainty about the global economic outlook in general, appear likely to have a negative influence on client activity levels in the first quarter of 2012. Such circumstances would make sustained and material improvements in prevailing market conditions unlikely and would have the potential to generate headwinds for revenue growth, net interest margins and net new money. In light of the above, traditional improvements in first quarter activity levels and trading volumes may fail to materialize fully, which would weigh on overall results for the coming quarter, most notably in the Investment Bank.”
Analysts, according to financial media, were looking for Q4 net profits of CHF658 million but UBS reported CHF393m, down from third quarter profits despite the write-off in Q3 of 1.8 billion lost by a rogue trader.
Analysts were also looking at the bank’s capital-building and to see how well UBS is offsetting reduced revenue streams with continued cost-cutting. They were not disappointed here: UBS is currently one of the world’s best capitalized banks, noting in its statement to media Tuesday that it had reduced “Basel III risk-weighted assets by an estimated CHF20 billion and [was] building capital ratios”.
In 2011 it cut the bonus pool by 40 percent as part of cost reductions of CHF2.1 billion. Total costs last year were CHF22.4b. The company trimmed jobs but overall staffing remained at nearly 65,000 employees worldwide.
The year-end results were published with fourth quarter results before markets opened Tuesday 7 February.
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”.
ZURICH, SWITZERLAND – UK and Swiss banking regulators are reported by the Wall St Journal to be planning to fine Swiss bank UBS for shortcomings in supervising risky trades. The newspaper cites “people close to the situation”, noting that regulators from the two countries will complete their investigations by mid-February into the $23. billion loss by trade Kweku Adoboli.
The former UBS employee pleaded not guilty Monday morning 30 January in London to charges of fraud.
Stock markets down on gloomy news
ZURICH, SWITZERLAND – Standard & Poor’s applied new credit rating standards to 37 of the world’s largest banks 30 November, which resulted in the downgrading of a number of major banks, for different areas of their businesses. Seven of eight US banks on the list were downgraded. China Construction Bank received an upgrade, the only bank to do so. And 20 banks remained “stable”.
The agency published new criteria for bank ratings 9 November, so the downgrades were not completely unexpected, but shares fell across Europe on the news, reports Business Week. S&P’s did not immediately provide details oabout individual downgrades, but will do so Wednesday. Switzerland’s largest bank, UBS, was given a rate of A, down from A+.
Other banks downgraded include US-based Bank of America Corp. and several subsidiaries, Citigroup, Goldman Sachs Group, JP Morgan Chase & Co, Morgan Stanley and Wells Fargo & Co.
In the UK, Barclays, Lloyds, Bank of Scotland and HSBC were downgraded.
The changes could increase the borrowing costs of the banks.
AP suggests that Bank of America could be hurt most by the cut, while the Financial Times
Swiss president says concern over legality of UK, German deals is EC’s “internal” problem
Swiss President Micheline Calmy-Rey in Geneva 28 November
GENEVA, SWITZERLAND – Switzerland is looking for an agreement with the US that will draw a line on the past, where banks and US tax fraud or evasion is concerned, Swiss President Micheline Calmy-Rey said Monday 28 November. It should include an agreed method for the US to collect tax money in the future while Swiss banking secrecy laws are respected.
“We don’t want to be a place for people who are trying to evade taxes. But we want to sort out past issues, once and for all, and put some order into [things],” she said, referring to ongoing problems between Swiss banks and the US tax arm, the IRS.
“And in the same agreement, we want to deal with the future,” for example through the kind of withholding tax agreement Switzerland struck in August with German and the UK.
“That, in essence, is our position, and it’s the same as it was with the UK and Germany.”
Her remarks were made at a press conference in Geneva Monday afternoon, 28 November where the president was presenting an overview of International Geneva, and its growth in size and importance in the past decade. She earlier attended the opening of the International Conference of the Red Cross and Red Crescent in Geneva.
EU tax commissioner suggests to UK paper the EU might sue Britain
Switzerland, under the UK and German agreements, which have yet to be ratified, is to collect withholding taxes on transactions by financial institutions, then turn over the money to the other countries without divulging the name of the account owners.
But European Union Tax Commissioner Algirdas Semeta told the Financial Times in an interview published Monday morning that he believes Britain and Germany went too far in signing their own bilateral tax agreements with Switzerland. The FT writes that:
“Brussels is threatening to sue Britain unless ministers significantly alter a landmark tax deal with Switzerland, in a dispute that will cast doubt over the £4bn to £7bn of expected proceeds for the Treasury. European Commission lawyers concluded that the bilateral deal, which recovers billions of unpaid taxes in return for protecting the prized secrecy of the Swiss banking system, is in breach of European Union laws that are tougher on tax evasion.”
Micheline Calmy-Rey, Swiss president
Calmy-Rey says this is an internal matter for the European Union, and it’s not for Switzerland to comment on who is competent in this area, the EU or its member states.
Switzerland and the European Union have a tax agreement covering “taxation of savings income in the form of interest payments”, signed in 2004 and revised in 2008 and again in January of this year.
The FT reports indicates that the EU’s pressure on Britain and Germany to renegotiate their deals with Switzerland is causing some friction.
Whether or not Switzerland would be open to new negotiations remains unclear, although the Swiss Bankers Association CEO Claude-Alain Margelisch said last week that “our view is that there can be no renegotiation” and the organization’s priority is to see that all parties are convinced that the agreements are true and fair compromises.
US talks could create new agreement, but form is still unclear
The US-Swiss talks are widely expected to be completed within weeks if not days, but the ultimate form an agreement might take is not yet clear, Mario Tuor, spokesperson for the Swiss Federal Tax Office told GenevaLunch Monday evening. The two countries have a treaty dating back to 1996 that covers tax fraud, still in place, and a new treaty covering tax evasion, which goes before the Swiss parliament in December 2011.
Tuor repeated Calmy-Rey’s assertion that Switzerland also wants an agreement which covers the banks not currently being investigated by the US Justice Department for helping Americans evade US taxes. “The form [it would take] is not yet clear. But it is clear now that we will not need a parliamentary agreement,” which a treaty would require. “We won’t need an agreement that calls for a treaty because it will be based on existing law.”
Switzerland and the US signed a treaty in 2009 that covered an American request for assistance with UBS 4,450 bank accounts, whose owners had not been identified, thus putting the demand outside the existing legal framework.
The talks are raising questions among many Americans who live overseas and who are grappling with the implications for them of tax reporting changes that were designed to prevent fraud by wealthy Americans who live in the US and have offshore accounts.
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
ZURICH, SWITZERLAND – Bonuses at Swiss bank UBS’s investment bank could be cut by up to 10 percent to help cover the CHF1.8 billion lost by rogue trader Kweku Adoboli earlier this year, new chief executive Sergio Ermotti has told the Financial Times. The bank was criticized after it published third quarter results 25 October, according to the FT, for not using the bonus buildup to reduce the loss: “The approach, which meant that 90 per cent of the investment bank’s SFr1.35bn of third-quarter revenues was set aside for pay and bonuses, was widely criticised. Analysts said that it appeared the bank was seeking to push the cost of the trading scandal on to shareholders rather than its own employees.”
Ermotti is a Swiss citizen who speaks Italian, French and German but he is a newcomer to the bank who has spent much of his career outside Switzerland. He has a salary of CHF2.5 million, but the bank has said it will wait until early 2012 to determine his bonus as part of his compensation package, Bloomberg reports.
ZURICH, SWITZERLAND – Switzerland’s largest bank, UBS, said Thursday 17 November that it will strip down its investment banking business and reduce its risks to concentrate on global wealth management and its private banking business in Switzerland. The restructuring was detailed at an investors conference in New York, with new chief executive Sergio Ermotti giving his first major address.
The bank now manages CHF1.4 trillion in invested assets under its wealth management businesses.
Ermotti was confirmed in his post two days ago after two months in the job as the interim CEO.
The bank will cut more than 300 jobs in addition to the 1,500-plus it announced in August, in the next four years. These will be mainly through investment banking attrition. The investment banking business will be reduced by nearly half, with the current CHF300 billion in risk-weighted assets cut by CHF145b.
The group’s capital is expected to rise as a result, to about 13 percent as a result, above the requirements of the stringent new Basel III rules.
The Financial Times points out that the bank’s new strategy parallels to some extent that of other international banks and in particular Credit Suisse, but “the two Swiss groups differ from their big international rivals in their emphasis on private banking as the central and growing part of their business.”
The bank says it plans to pay a dividend for 2011.
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:
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
UBS real estate risk map Q3 2011 (click on image to view larger)
LAUSANNE, SWITZERLAND – The Swiss Real Estate Bubble Index, published quarterly by bank UBS, shows the housing market continuing to boom but not at risk of a housing price bubble, nationwide.
Morges is one of two new regions that have been added to the “at risk” of reaching the bubble stage, however, along with the Oberengadin region and new regions have been added for monitoring for risk.
The third quarter 2011 risk level is 0.58 on the scale that tracks slump, balance, boom, risk and bubble. “A value of 0.58 corresponds to the boom level and implies no elevated risk of a Switzerland-wide correction,” UBS notes.
“Only when the index surpasses a value of 1 is the market considered risky. The index reached its peak in the early 1990s at a level of 2.5 at the height of the last Swiss real estate bubble.”
The quarterly report shows some cooling of house prices but no change in trend foreseen for home mortgage debt.
Lake Geneva region remains expensive, Morges shifts to “at risk”
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.”
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 – Mike Stewart, hired by UBS in July from Bank of America Merrill Lynch, was named sole head of equities at the Zurich bank late Wednesday. His rapid rise is the result of several changes in the bank’s equities business management, with the bank announcing the resignation of “Francois Gouws and Yassine Bouhara, co-heads of Global Equities, following the recently announced unauthorized trading incident. Their resignations come as they assume overall responsibility for the effective management of the Equities business. In addition, appropriate disciplinary action will be taken against other individuals in the Equities business as a result of the incident. UBS also expects to take disciplinary action against responsible staff in other functions.”
The bank lost $2.3 billion in September at the hands of a rogue trader in London, now under arrest.
The bank notes in a statement that “under the circumstances, including the fact that independent investigations are ongoing, we are not providing further details on the unauthorized trading incident at this time.”
ZURICH, SWITZERLAND – UBS, Switzerland’s largest bank, expects to turn a profit during the third quarter of 2011 despite the $2.3 billion loss due to a rogue trader now under arrest. The bank says in a statement issued Tuesday 4 October that it expects to announce a “modest profit” 25 October.
“UBS’s capital position remains strong and its capital base at the end of the third quarter of 2011 is expected to remain broadly in line with the balance at the end of the previous quarter, including the loss associated with the unauthorized trading incident. The BIS Basel II tier 1 capital ratio is expected to decline slightly compared with the second quarter due to the impact on risk-weighted assets of the unauthorized trading incident.”
UBS CEO's Oswald J Grübel resigns - Photo UBS
ZURICH, SWITZERLAND – Oswald Gruebel, 67, has resigned as CEO of UBS AG, Switzerland’s largest bank, after a $2.3 billion dollar loss from unauthorized trading.
On a statement released on Saturday 24 September, UBS stated that the board had named Sergio Ermotti, the bank’s European head, as interim CEO.
UBS said in July that former Deutsche Bundesbank President, Axel Weber would become chairman in 2013, but there’s no word yet if he will take on the job earlier than planned.
According to an article by Swiss financial-magazine Bilan, Oswald Gruebel was under heavy pressure from the board to leave, as they met on 22 September.
However, UBS’s Chairman Kaspar Villiger who announced Grübel’s resignation said:
“The Board regrets Oswald Grübel’s decision. Oswald Grübel feels that it is his duty to assume responsibility for the recent unauthorized trading incident. It is testimony to his uncompromising principles and integrity. During his tenure, he achieved an impressive turnaround and strengthened UBS fundamentally. He steps down having helped make UBS one of the world’s best capitalized banks. On behalf of the Board of Directors, I extend my heartfelt gratitude to him for everything he has done for UBS.”
Grübel who took his post in February 2009, will receive no severance and have no further role at the bank.
UBS announces major unauthorized trading
ZURICH, SWITZERLAND – UBS chief executive Oswald Gruebel is reported by Swiss financial magazine Bilan to be under pressure from the board to leave, as the executive committee meets in Singapore today.
Meanwhile, Bloomberg/Business Week carries a detailed report on the case of a former UBS manager who faces Britain’s financial regulators in November over his failure to manage risk from 2006 to 2008.
The American publication and news agency say the case involving the UBS manager, who now works in risk management for another company in Zurich, “is an example of UBS failing to police errant trading in London years before the bank said this week it lost $2.3 billion from unauthorized trades.”
UBS in 2009 paid $12.5 million in fines for unauthorized trades, to the UK regulator, then the third highest fine that had been set.
UBS, like a number of international banks, also paid hefty compensation to clients whose funds were involved in unauthorized trades before financial regulators began to tighten the rules.
The bank said the $2.3 billion loss by one of its traders in London last week did not involve client funds.
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.
ZURICH, SWITZERLAND – The banking sector is coming under pressure in Switzerland, with some calls for UBS chairman Oswald Gruebel to resign following the arrest of a 31-year-old rogue trader Thursday 16 September in London. The man was charged Friday with abuse of his position and fraudulent accounting. He is being investigated for losing more than $2 billion for UBS.
The bank tipped off police, who arrested the young Ghanaian at his office. The man is charged with two cases of fraud, one in 2008-2009 and another that began in January 2011 and was run until the day before his arrest. According to TSR, he cried when the charges were read out in the London court.
Moody’s, late Thursday 16 September, said it has placed UBS’s AA3 long-term note under review, and it is studying the implications of the loss on the investment bank’s capacity to increase earnings with an appropriate risk level.
Martin Wolf at the Financial Times wrote a thank you to UBS saying that he could not think of a better way to illustrate the “unregulatable risks to which investment banks are exposed.” Wolf is a member of the UK’s Independent Commission on Banking.
The Wall Street Journal reports that several members working at the desk of the London trader have been suspended while the fraud is investigated.
The bank discovered it late Wednesday, contacted London police shortly after midnight and the man was arrested during the night. The bank is being accused by some observers with its supervisors taking too long to realize that a large amount of money was being traded without authorization.
UBS shares fell nearly 11 percent in a market that rose 0.29 percent. By Friday afternoon’s closing in Zurich they were trading at 10.38. They were trading around 12 at the start of September.
UBS announces major unauthorized trading
ZURICH AND BASEL, SWITZERLAND – In a short, last-minute statement Switzerland’s largest bank UBS says it has “discovered a loss due to unauthorized trading [...] in the range of $2 billion US dollars.
The UBS statement released to the media on 15 September says the loss happened due to “unauthorized trading by a trader in its Investment Bank”.
The statement goes on to say:
“The matter is still being investigated, but UBS’s current estimate of the loss on the trades is in the range of USD 2 billion.
It is possible that this could lead UBS to report a loss for the third quarter of 2011.
No client positions were affected.”
No other information has been given by the bank.
GENEVA, SWITZERLAND – Police in Geneva are not immediately releasing details, but an armed robbery reportedly involving three gunmen occurred Monday morning at the UBS bank offices near the Cornavin train station in central Geneva.
Details to follow as they are released.
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
ZURICH, SWITZERLAND – UBS, Switzerland’s largest banks, will cut 3,500 jobs by the end of 2013, it announced Tuesday morning 23 August, in an effort to reduce expenses by CHF2 billion. The news has been expected for some weeks and, says the bank, is in line with its statement in July about costs.
The cuts are needed, says UBS, to improve operating efficiency. “Of the expected 3,500 staff reductions, approximately 45% will come from the Investment Bank, 35% from Wealth Management & Swiss Bank, 10% from Global Asset Management, and 10% from Wealth Management Americas.”
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.
UBS consumption indicator at its lowest level this year
ZURICH, SWITZERLAND – Swiss banking giant UBS AG warned of job losses after a strong Swiss franc and “economic uncertainty” led to a near halving in second-quarter profits.
The Zurich-based bank said it would slash costs over the next two to three years but declined to comment on how many jobs will be cut, saying only it will take a look at the restructuring later this year.
During the presentation of its second quarter results this morning, UBS said its net and pre-tax profits had dropped, and lowered its annual earning forecasts. Pre-tax profits UBS said, fell to CHF1.7 billion from CHF2.2 billion in the previous quarter.
“Having reached a high point for the year in May, the UBS consumption indicator fell significantly by 0.40 points to 1.48 in June, the lowest level this year.”
Group revenues was CHF 7.2 billion, down 14% due to “lower client activity and currency movements,” said the report.
Full report: UBS consumption indicator at its lowest level this year and UBS second-quarter profit before tax CHF 1.7 billion; Group net new money CHF 8.7 billion; tier 1 capital ratio 18.1%.
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.
ZURICH, SWITZERLAND – Swiss bank UBS surprised the media and business worlds at the end of last week by appointing former German central banker Axel Weber as chairman, starting in 2013. Reflection on the implications have been surfacing in Swiss media today and yesterday.
Reaction has generally been positive, in part at the speed with which the appointment was made. Weber was widely tipped to be chairman of Germany’s Deutschebank.
Swissinfo, in English, takes note of the Ethos Foundation’s objection to his initial salary of CHF2 million plus 200 shares, and notes that his first major task is likely to be finding a replacement for Oswald Grueber as chief executive officer.
Le Temps talks about his early days as an economics professor, then his role as a near-member of Angela Merkel’s government, but also his continuing ability to surprise, as a man who doesn’t do what others expect.
Business news group Agefi points out that he is joining a bank that continues to face difficult market conditions, and he’ll have to work to earn his keep.
Weber, in an interview with Zurich-based NZZ that ran Saturday, talks about the ties and similarities between German and Swiss banking.
BERN, SWITZERLAND – A Swiss spokesman for the new State Secretariat for International Financial Matters (SIF), Mario Tuor, has confirmed that Switzerland and the US have been holding “informal talks” to explore solutions to the problem of undeclared assets held by Americans in Swiss bank accounts, but he told Reuters Friday 10 June that many of the details appearing in the media jump the gun and can’t be confirmed.
The rumours have been flying for the past two days, with Reuters, Bloomberg and the New York Times vying for scoops and exclusive information and ultimately giving credence to the stories. The newspaper quotes three unnamed sources; US government officials leaked the information to the newspaper that the two countries were expected to come to an agreement in July: “As part of the agreement under discussion, known as a global resolution, US government agencies would invite the banks to pay a fine, exit their undeclared offshore banking businesses for Americans, and turn over client names to the Internal Revenue Service (IRS) and the Justice Department.” In exchange, says the paper, In exchange, “the agencies would drop an ongoing investigation into the banks.”
US officials have often in the past used the New York Times to leak information and their position, in advance, on Swiss-US tax and financial discussions.
Tuor told Reuters that “the two sides had exchanged ideas but that he could not confirm the July date, whether the two sides were eyeing a multi-bank solution, or any other details mentioned” in an article published Thursday by Reuters. “‘There were several sets of talks, one of which was on the sidelines of the IMF’s spring meeting and was about the Fatca, though ideas were also exchanged about finding a solution for the past,’” Tuor told the news agency.
Fatca is the Foreign Account Tax Compliance Act adopted by the US at the end of 2010, which goes into effect in 2013, and which will require non-US banks to provide the US with considerable data on the accounts of Americans and foreigners with US assets. The goal is to catch people who are illegally avoiding pay US tax.
A side effect of the US adopting Fatca, however, has been a growing reluctance on the part of banks in Switzerland in particular, but also banks elsewhere, to keep US citizens or foreign residents in the US as clients. Some accounts have been closed, creating a string of financial management problems for people who are not hiding from the IRS.
