Thursday, February 19, 2009

The end of Secret Swiss banking

Bloomberg reports on the collapse of secrecy in the Swiss Banking industry. From what I hear, Singapore is the new offshore destination for secret banking since their laws are tighter then Switzerland.

If India did something similar to the US, how many skeletons would tumble out of the closet ?

Switzerland’s unprecedented decision to let UBS AG hand U.S. tax authorities clients’ details risks damaging a banking industry that relies on a pledge of confidentiality to win business, legal scholars said.

“This could open the floodgates,” Peter V. Kunz, head of the business law department at the University of Berne, said in a telephone interview today. “Giving in to the U.S. sends a signal to other countries and the European Union. I don’t see what would stop them from acting in the same way.”

The Swiss Financial Market Supervisory Authority said yesterday it would allow UBS to pass on some client data to save the country’s biggest bank from criminal charges in the U.S. that it said could have “put its existence at risk.”

Switzerland is being increasingly pressed by countries such as neighboring Germany to amend banking secrecy laws, first introduced in 1934, which they say promote tax evasion. German Finance Minister Peer Steinbrueck said last year the Swiss should be put on a “blacklist” of uncooperative tax havens. The European Commission proposed this month to end anonymity for bank account holders within the 27-nation area, and may seek to expand the measure to cover Switzerland and Liechtenstein.

“Swiss banking secrecy will not exist in today’s form in two or three years,” said Dirk Nitzsche, a senior finance lecturer at Cass Business School in London. “Switzerland has already done a lot over the past couple of years. But the international community wants more.”

Offshore Center

Client confidentiality is a cornerstone of Switzerland’s banking industry, which has attracted some 27 percent of all privately held offshore assets, according to the Swiss Banking Association. U.S. law views tax evasion as a crime. Swiss law doesn’t. The Swiss view tax fraud as a more serious offense.

The U.S.’s success “is likely to encourage other tax authorities to pursue claims against the Swiss more vigorously,” Dirk Hoffmann-Becking, an analyst at Sanford Bernstein & Co., said in a note to clients today.

The U.S. is likely to continue to put pressure on both UBS and the Swiss government to make it harder for individuals to move money offshore as President Barack Obama’s administration attempts to finance its economic stimulus plan, he added.

The European Commission, the European Union’s executive arm, today said it welcomed any effort to improve governance.

“We expect a similar request from EU member states to Switzerland would not receive different treatment,” Maria Assimakopoulou, spokeswoman on tax issues for the agency, told reporters in Brussels today.

Justice Department

Swiss Finance Minister Hans-Rudolf Merz described the settlement as an “isolated case” after the U.S. authorities set a Feb. 18 deadline for UBS to reach a deal or face indictment. While it’s “problematic” that the official procedure wasn’t followed, an indictment and possible failure of UBS would have had consequences for the whole Swiss economy, he stressed.

The U.S. Justice Department accused UBS of conspiring to defraud the country by helping 17,000 Americans hide accounts from the Internal Revenue Service. The U.S. will drop the charge in 18 months if the bank reforms its practices, aids prosecutors and pays $780 million. UBS will immediately turn over names of about 250 clients, according to people familiar with the matter.

“The U.S. authorities didn’t want to wait, as a constitutional state is supposed to do, but pressured for an exceptional allowance,” Kunz said. “The legal basis for such actions is very thin.”

‘Problematic’

The government should have followed the information-exchange agreement it has with the U.S. and waited for a Swiss court to rule on the matter, legal professors say. Clients have to be notified before their data is released under Swiss law. The federal administrative court received objections in November.

“What concerns me the most is that evidently legal protection for these clients is being impeded,” said Rainer Schweizer, a law professor at the University of St. Gallen. “Clients have to complain about this to the federal court.”

UBS agreed only to the immediate disclosure of account holders involved in fraudulent or sham offshore account structures, according to people familiar with the matter. The Swiss finance ministry has had some 40 people working on the case, trying to determine whether any of the clients whose information was requested committed tax fraud.

Merz said that data on some 200 to 300 clients that is transferred to the U.S. “clearly” relates to tax fraud rather than tax evasion. UBS Chairman Peter Kurer told Swiss television in an interview that the clients had made “false statements in writing” to the U.S. tax authorities.

9 comments:

Anonymous said...

Sobha Developers still in talks for rescheduling debt

-Gadadhari_bhim

SabbalSeshu said...

@sachin:

Re: Mumbai real estate prices

Except for Thane and Vishi, the big time builders are still reluctant to cut the prices as every one is flush with black money and the financial pinch has not affected them. Like everything, real estate also has a critical point. Let us wait and see when it snaps.

Anonymous said...

My guess it that this action is precursor to Swiss joining Euro. I thought all along that the Euro would break in crisis but Euro is being looked as saviour by countries. Swiss banks have hell a lot of bad loans and Swiss govt can't really bail out at such magnitude. Any way Swiss banks will collapse. Why not cooperate with Europe & US prior to that?

Anonymous said...

Are we heading towards deflation? The answer is,
if not deflation, definitely towards –ve inflation. Deflation is sustained –ve inflation.
Deflationary spiral is the most vicious economic downturn, where prices &
income will keep falling to offset each other. Deflation is most often associated with
the Great Depression. When current crisis is comparable to great depression, -ve
inflation is definitive.
When prices will show –ve growth in west, how come east will have the +ve price growth?
It can show +ve growth provided east will become the consumer of goods than a producer of goods.

Today economists are worried due to possibility of deflation which can lead us to
depression. With optimistic view, we can rule out the possibility of deflation but
definitely we can’t ignore the negative data.

http://money.cnn.com/2009/02/19/news/economy/
deflation/index.htm?postversion=2009021916

http://www.livemint.com/2009/02/16011429/
8216India-has-room-for-more.html

http://blogs.wsj.com/economics/2009/02/17/
feds-bullard-us-facing-risk-of-sustained-deflation/

Will the salary cut will revert back soon?

So guys let it fall then only pick up, minimum 50% price cut is guarantee.

NOTE: If depression is a possibility, I will increase my guarantee to 70% price cut.
But at that point no one will even discuss about the RE, only Food will be the subject
of discussion.

Vulture.

Anonymous said...

Vulutre/HB,

India is going down the drain you are spot on read this article..

Cheers!!!

Key sectors bounce back on stimulus
20 Feb 2009, 0655 hrs IST, Rajeev Deshpande, TNN


NEW DELHI: In what would be music to the UPA government's ears just ahead of a close electoral race, the two stimulus packages it has devised seem
to have begun to show results with an upturn in key sectors like steel, cement, autos, food and beverages and railway freight.

Cabinet secretary K M Chandrashekhar told TOI in an interview that strong rural demand seemed to be shoring up the economy. "I think we are seeing the first clear signs of a turnaround. The spending on flagship and infrastructure programmes and steady hikes in MSPs for wheat and rice seem to have kept the economy afloat, driving demand," he said.

The data now flowing in is easing some of the worry lines in government as the negative trends are not only levelling out, but the graph has begun to inch upwards again. Though these are early days, government hopes that with adequate follow-up measures, particularly with states that are key to the revival recipe, the trends will hold and strengthen.

The data shows that the cement sector has grown 9.97% in December 2008 as compared to November and the year on year increase is 11%. Steel, which had declined steadily through September, October and November last year has shown a recovery in December 2008 and January 2009 and has now touched the May 2008 figure of 22.86 metric tonnes when the sectoral growth rate was 4.1%. Though the steel sector has been slow, its climb back into positive figures is seen as reason for cheer.

Cement and steel are seen as key drivers with the construction sector seen to have a significant impact on the growth sentiment. Similarly, some of the gloom over the automobile sector seems to be lifting, with the January 2009 figures in the passenger vehicles sector showing a 32% rise over December 2008 while the increase for commercial vehicles is 23% over a similar time frame.

The growth in commercial vehicles is particularly encouraging since higher demand for transport vehicles is often viewed as a lead indicator of positive trends in the rest of the industrial sector.

Interestingly, FMCGs are growing again. "There is a record growth in year on year terms at 26.4% for the quarter ended December 31, 2008," the top bureaucrat said. Food and beverages also registered a record 28% growth in the quarter ended December 31, 2008, indicating that the hospitality industry and food retailers may not have been badly hit. Some of the high-end sales may have gone down, but the rest are doing well.

The growth in railway freight had declined to 2.25% in October-November, 2008, but the December 2008 figures show a heartening growth of 7%, which the government feels will mark a climb back to more healthy growth.

The official data is in sync with the feeback ToI has recieved from several industrialists with business interests in these sectors. Most of them said that the economic slowdown had begun to decelerate and the growth worm was slowly but steadily moving northwards again.

The government feels that its efforts to pump money into the rural economy and the public sector are paying off even though the export sector remains a worry due to a fall in orders. Here, too, the government feels that the movement of the rupee in recent weeks may well provide some succour to exporters. "The depreciation of the rupee may provide a cushion to the exporters," said Chandrashekhar.

He said there is a time lag before the full effect of the measures taken by the government would begin to show. "We have had meetings with the states and the RBI is also in the picture. The mechanism will work at the state level to address sectoral issues, let's say SMEs, to resolve the problem quickly. I don't think liquidity is going to be an issue," said Chandrashekhar.

The Cabinet secretary said credit windows had been opened to NBFCs to ensure infrastructure areas like roads are not hit because contractors working on PPP projects run out of money. Similarly, RBI has liberalized norms for external commercial borrowings. Chandrashekhar did stress the need for sustained follow-up, particularly during the election months.


http://timesofindia.indiatimes.com/Stimulus-package-works-key-sectors-bounce-back/articleshow/4157663.cms

Anonymous said...

Blackstone offers Rs 240 cr for Prestige asset
20 Feb 2009, 0207 hrs IST, Boby Kurian & Rajesh Unnikrishnan, ET Bureau

Print EMail Discuss Share Save Comment Text:
BANGALORE / NEW DELHI: Blackstone has offered around Rs 230-240 crore to buy out southern realty major Prestige Group’s serviced apartment
business managed by the international luxury hospitality brand Oakwood. The private equity giant’s proposal, which is still in the early stages, falls below Prestige’s asking valuation of Rs 300 crore, atleast two people close to the development said.

However, Blackstone appears to have emerged as the top bidder for the 177 key serviced apartment asset located at UB City in Bangalore’s central business district. When contacted, a senior Blackstone official said the firm will not comment on specific deals.

Oakwood Premier Prestige, a full-service five star one-to-three bedroom property, became operational in the last quarter of 2008. Oakwood has three properties in India currently, with Pune and Mumbai being the other locations. Sources said a Hong Kong-based fund, as well as, domestic financial investors like Kotak have also looked the potential deal. An official with Kotak private equity said the firm did show early interest, but has decided not to proceed on it.

Prestige Group chairman & managing director Irfan Razack said he was not interested in selling the asset now. Earlier, media reports said the Bangalore-headquartered realty player has put a few of its projects, including Oakwood, on the block to unlock liquidity. Prestige is UB Group’s joint venture partner in the 1.5 million sqft mixed use development UB City where Oakwood is located.

One banking source said a deal looked uncertain as most potential buyers were looking at bargain valuation in the prevailing market conditions. It is believed that Prestige was looking at Rs 350-crore valuation in the beginning, but has now decided to settle for at least Rs 300 crore, still higher than all the offers on the table at present.

Deal-making in the Bangalore real estate market, like elsewhere in the country, has cooled off as discussions get stuck on valuations. The city’s frontline developers have been in the market to unlock value from select assets, but they are unwilling to strike deals at deep discounts. Investors like Blackstone and JP Morgan have been looking at attractive investments in a downturn, especially in the realty segment where valuations are beginning to be battered.

The 50 year-old Oakwood Worldwide has 23,000 residences at over 4,000 locations offering complete housing solutions to mainly corporate travelers globally. Oakwood had announced plans to manage eight properties in India across cities like Hyderabad, Gurgaon and Chennai in the future.

Shailesh said...

Outsourcing: Bye bye Chennai, g'day Brisbane

An eclectic mix of 31 cities, in countries ranging from Australia and Ireland to areas in South America and Africa, will challenge today's best-known outsourcing centres in India and China, according to advisors at KPMG.

Faced with overburdened telecoms infrastructures and overstretched labour markets in traditional offshore locations, cities including Brisbane and Belfast are among the alternatives that should be considered by companies, the KPMG report says.

Only 3 Indian cities make it to 25 list,

Ahmedabad
Jaipur and
Nagpur

So much for India's cost advantage and high skilled labour.

Vik said...

Frankly I don't believe in these moronic studies. Most of the times, these studied are funded by some vested interest who are looking to capitalize one some vested interest. Look at the power supply situation in Nagpur, the area around it is in drought most of the time. Same goes for Jaipur.
Where were these moronic analysts when the Mahindra World City SEZ was being built outside chennai. Where were these guys when Electronic City was being built.

Anonymous said...

Sobha Developers still in talks for rescheduling debt

Sorry somehow the link didn't work the last time. Reposting.

Gadadhari_bhim