Credit Suisse scandal threatens Swiss efforts to clean up reputation

Swiss banks, having paid more than $5 billion to settle allegations of helping wealthy Americans evade taxes, have trumpeted their reformed ways, publicly encouraging clients to sign up to government programs allowing them to declare untaxed assets. (Reuters)
Updated 06 April 2017
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Credit Suisse scandal threatens Swiss efforts to clean up reputation

ZURICH: An anonymous tip to Dutch authorities on thousands of suspicious accounts at Credit Suisse could hardly have come at a worse time for Switzerland and its banks.
The information that triggered raids in five countries raises new doubts about the effectiveness of Switzerland’s efforts to shed its decades-old reputation as one of the world’s major tax havens.
“It is a wake-up call not only for the banking community but also for (the) authorities,” said Mark Pieth, an anti-corruption expert and criminal law professor at the University of Basel.
“Instead of really just being angry at others they should ask, have we really been zealous enough?”
Switzerland is among the countries that signed up to a global data-sharing program led by the Organization for Economic Co-operation and Development (OECD), known as the Automatic Exchange of Information (AEI), which was designed to root out tax dodgers.
Swiss banks, having paid more than $5 billion to settle allegations of helping wealthy Americans evade taxes, have trumpeted their reformed ways, publicly encouraging clients to sign up to government programs allowing them to declare untaxed assets.
But last week’s raids on Credit Suisse’s offices in London, Paris and Amsterdam as part of a coordinated investigation in five countries show Switzerland still has a way to go to break with its past.
It is a wake-up call for financial markets as well.
“People really thought that, with the upcoming AEI and the cleanup of the European client portfolio completed, this stuff should not be an issue anymore,” Andreas Venditti, a banking analyst at Vontobel, said. “Now the market seems to be confused about what to think.”
Mark Branson, head of Swiss financial watchdog FINMA, said last week’s news was unwelcome at a time when Switzerland is presenting itself as a reformed financial center whose selling point is stability and reliability rather than tax perks.
“These headlines will not vanish overnight although the business model has fundamentally changed,” said Branson, speaking to reporters on Tuesday.
Another sign that Switzerland has to work harder to improve its reputation was the apparently deliberate efforts by Eurojust, the EU judicial agency which helped coordinate last week’s raids, to keep Swiss prosecutors out of the loop on enforcement actions.
Switzerland’s Office of the Attorney General on Friday demanded a written explanation for the snub.
In the new investigation, raids began on Thursday in the Netherlands, Britain, Germany, France and Australia, with visits also made at three of Credit Suisse’s offices. This followed a tip-off to Dutch prosecutors about 55,000 “suspect accounts.”
One of the big questions is how many of the accounts represent existing client relationships at Credit Suisse, Switzerland’s second-biggest bank, and how many are legacy accounts from when Swiss banking secrecy shielded customers’ money from tax authorities.
Iqbal Khan, the head of Credit Suisse’s International Wealth Management division, said in an interview he did not know where the 55,000 figure referred to by the Dutch office for financial crimes prosecution had come from as the bank had fewer accounts than that for all of Europe.
Khan, who is responsible for Credit Suisse’s private banking operations outside of Switzerland and Asia Pacific, said it was not certain if existing clients would be implicated.
Branson said FINMA had been in contact with Credit Suisse about the raids but was not in a position to say what portion of the case related to old accounts.
One thing that does seem certain is legal and regulatory issues are increasingly considered as a cost of investing in Swiss private banks.
Moritz Baumann, a bank analyst and client adviser at Swiss wealth manager Albin Kistler, said: “The fact is that legal issues are practically part of doing business as a bank.”


Asian stocks hit as Trump drops Kim summit but losses tempered

A man walks past a bank electronic board showing the Hong Kong share index at Hong Kong Stock Exchange Friday. (AP Photo/Vincent Yu)
Updated 25 May 2018
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Asian stocks hit as Trump drops Kim summit but losses tempered

  • Traders had already been nervous in recent days after the US president warned he could pull out of the June 12 meeting with the North Korean leader, while also voicing his displeasure at a deal to avert a trade war with China.
  • In a letter released by the White House, Trump told Kim he was canceling the summit because of North Korea’s “anger” and “hostility.”

HONG KONG: Asian markets mostly fell on Friday as Donald Trump shocked the world by pulling out of next month’s historic summit with Kim Jong Un, though analysts said the losses were tempered by hopes the talks can be rekindled.
Traders had already been nervous in recent days after the US president warned he could pull out of the June 12 meeting with the North Korean leader, while also voicing his displeasure at a deal to avert a trade war with China and threaten tariffs on car imports.
The news Thursday took many by surprise — including North and South Korean officials — and fueled concerns about the future of a rapprochement that has had many hoping for peace on the divided peninsula.
In a letter released by the White House, Trump told Kim he was canceling the summit because of North Korea’s “anger” and “hostility.” The message came after a key aide to Kim hit out at comments from Vice President Mike Pence, saying they were “ignorant and stupid” and warning the talks could be canceled.
However, Trump’s letter added that the talks could still go ahead “at a later date.”
For its part, Pyongyang said the decision “unexpected” and “regrettable” but added: “We again state to the US our willingness to sit face-to-face at any time in any form to resolve the problem.”
“It looks like we are back to fire and fury as the modus operandi for the White House again after President Trump (threatened) a new 25 percent car import tariff and canceled the summit with North Korea,” said Greg McKenna, chief market strategist at AxiTrader.
“Not only was the summit canceled but it was back to threatening the DPRK with a military response.”Wall Street ended lower, while Asian trading was muted. Tokyo ended the morning slightly higher, while Hong Kong slipped 0.3 percent and Shanghai was barely moved. Sydney and Singapore each fell 0.1 percent while Seoul was 0.2 percent lower.
Manila and Kuala Lumpur also fell but Wellington, Taipei and Jakarta were in positive territory.
While warning the issue remained fragile, analysts said there was still hope the meeting will go ahead.
“As we’ve seen countless times before, the president tends to walk back some of his more boisterous rhetoric time and time again,” said Stephen Innes, head of Asia-Pacific trading at OANDA.
“While the US and their allies have offered a way to prosperity for North Korea, it was never going to come without some significant concession on the nuclear non-proliferation front.”
And Eli Lee, Bank of Singapore’s head of investment strategy, added: “Given the US’ surprising acceptance of the meeting only in March, the cancelation... may simply be due to the fact that both sides need simply more time for preparation and to find a middle ground in terms of their demands.”
On oil markets, both main contracts extended Thursday’s more than one percent losses after Russia said an agreement with OPEC to cap production — which has provided support to prices in recent years — could be up for revision at a meeting next month .
The comments from Energy Minister Alexander Novak dented a rally in the commodity, which has hit three-and-a-half-year highs on the back of improving demand and supply worries from Venezuela and Iran.

Tokyo — Nikkei 225: UP 0.1 percent at 22,457.20 (break)
Hong Kong — Hang Seng: DOWN 0.3 percent at 30,666.38
Shanghai — Composite: FLAT at 3,154.04
Euro/dollar: DOWN at $1.1705 from $1.1725 at 2100 GMT
Pound/dollar: DOWN at $1.3364 from $1.3385
Dollar/yen: UP at 109.53 from 109.30 yen
Oil — West Texas Intermediate: DOWN nine cents at $70.62
Oil — Brent North Sea: DOWN 12 cents at $78.67
New York — Dow: DOWN 0.3 percent at 24,811.76 (close)
London — FTSE 100: DOWN 0.9 percent at 7,716.74 (close)