Sunday, April 3, 2016

Article on Rebuilding the Swiss Brand (4/3/16)

Ralph Atkins, Switzerland: Rebuilding the brand (FT 3/29/16), here.  The article starts with:
To foreigners, Switzerland often means Alpine mountains, cows, chocolates — and tax evasion. 
This is especially true in the US. Since the dark side of Switzerland’s bank secrecy laws was first exposed by US authorities in 2007, 85 Swiss banks have paid a total of $5.5bn in penalties and compensation related to claims they helped American clients sidestep tax collectors.
The article discusses considerable background, pro and con, to the Swiss brand.  Under the caption "Reputational Hit" it says:
But the Swiss reputation for political astuteness faced a serious challenge in the 1990s. It underestimated the force of a US-led outcry over its treatment of Holocaust victims’ dormant bank accounts, which broadened into arguments about the handling of refugees during the second world war and the extent of its assistance to the Nazi regime. A $1.25bn compensation deal was agreed in 1998. 
Then came the investigations into Swiss banking by US regulators, spurred by revelations from UBS whistleblower Bradley Birkenfeld. Privately, Swiss bankers and some politicians say Bern gave way too quickly in agreeing a deal on exchanging bank information with the US. A landmark settlement was agreed in 2009 with UBS, which paid a $780m fine. Credit Suisse took the biggest hit, when it was fined $2.6bn in 2014.
Switzerland’s image in Europe was also damaged by revelations about bank accounts used to hide wealth. Judicial investigations continue in France and Belgium against UBS, while Credit Suisse reached a €150m out-of-court settlement in 2011 with the German state of North Rhine-Westphalia. 
The zeal of finance departments in neighbouring countries still grates with the Swiss. “That Switzerland was a haven was nothing new,” says Kaspar Loeb, brand expert at Dynamics Group, a Swiss communications consultancy. “But when deficits began to grow and the economic situation changed, these countries started to think: where is there money we can take?” 
* * * * 
The need to ensure clients were fully tax-compliant hit Swiss banks hard. Credit Suisse saw more than SFr40bn ($41bn) in outflows from its international wealth management businesses as a result of tax “regularisation” programmes, which continue for clients from Italy. 
Although a fresh inquiry into allegations that UBS helped clients evade US taxes was launched by regulators last year, Swiss banks have realised that the rules of the game have changed. 
“Swiss banks have thoroughly reinvented themselves,” says Mr Reyl. “The multiple settlements with the [US] Department of Justice are clearly part of the past. We have moved to another world.” A top banker in Zurich adds: “What’s great about America is that you can sink to the bottom — and then make a comeback.”

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