Things could be better in Europe. Read more »
Swiss Banks That Tasked Employees With Helping Clients Evade Taxes Are Saving Themselves By Turning In Said Employees, Muttering “I can’t believe you’d do something like that, don’t you know tax evasion is illegal” Loud Enough For Others To HearBy Bess Levin
Swiss banks are turning over thousands of employee names to U.S. authorities as they seek leniency for their alleged role in helping American clients evade taxes, according to lawyers representing banking staff. At least five banks supplied e-mails and telephone records containing as many as 10,000 names to the U.S. Department of Justice, according to estimates by Douglas Hornung, a Geneva- based lawyer representing 40 current and former employees of HSBC Holdings’s Swiss unit, Credit Suisse, and Julius Baer Group Ltd. The data handover is illegal, said Alec Reymond, a former president of the Geneva Bar Association, who is representing two Credit Suisse staff members. “The banks are burning their own people to try and cut deals with the DOJ,” said Hornung. “This violation of personal privacy is unprecedented in the Swiss banking industry.” [Bloomberg]
Cuts were said to have gone down at the House of Dougan this week. Read more »
In an unusual move, the board of Credit Suisse Group AG Friday issued a statement to back Chief Executive Brady Dougan, saying it is confident management’s plans to bolster capital will ensure Switzerland’s No. 2 bank meets and exceeds regulatory requirements. Mr. Dougan’s problems have been building in recent days. Last week, he was caught up in an unusual public spat with Switzerland’s central bank over whether Credit Suisse’s capital cushion is adequate. Meanwhile, the Swiss bank’s stock has fallen sharply and some of its bankers are grumbling about Mr. Dougan’s performance as chief executive. The questions about Mr. Dougan have intensified in recent days and represent an unwelcome distraction for the bank, which has prided itself on avoiding much of the turmoil that has befallen its larger rival, UBS AG. The board has now moved to quell any speculation about Mr. Dougan’s future at the bank, saying it was comfortable with the progress that has been made toward meeting the Basel III capital requirements. [WSJ]
The SNB is therefore of the view that both big banks should further expand their loss-absorbing capital. For UBS, this implies a continuation of its capital strengthening process; and for Credit Suisse, an acceleration of the process, with a marked increase during the current year. … For Credit Suisse, given the low starting point and the risks in the environment, it is essential that it already substantially expand its loss-absorbing capital base during the current year. Apart from the planned reduction of risk, these improvements can also be achieved in other ways, such as by suspending dividend payments, or even by raising capital on the market through share issuance.
This was unwelcome news, and the banks’ loss-absorbing capital absorbed some losses, with CS down 9.4% today. This may have come as some surprise to the SNB, which thought that its suggestions were actually shareholder-friendly, saying that it “is also in the banks’ own interest to strengthen their resilience, as a sound capital base constitutes a competitive advantage in the core business of wealth management.” JPMorgan’s Kian Abouhossein agrees, arguing in a report today that CS will improve capital by shrinking assets, mainly in the investment bank, and that: Read more »
BreakingViews has a couple of posts up about one of my favorite things in the financial universe, Credit Suisse’s habit of paying its bankers in structured credit instruments that take pages to describe. How’s that going? Great:
Three years ago, around 2,000 employees were forced to take some $5 billion of the riskiest assets from the Swiss group’s balance sheet as their bonuses. Now, recipients are being offered the chance to buy more. What once seemed like a punishment has turned into something of a perk.
Investors in the “Partner Asset Facility” already sit on a paper profit of around 80 percent, thanks to a recovery in the value of the original portfolio. That gain is essentially safe, since most of the assets involved have been liquidated or sold down and the funds are sitting in low-risk, low-return investments. The snag is that beneficiaries can’t get to the payouts until 2016.
To ease the pain of waiting, Credit Suisse is giving participants another bite. They have a chance to plough some of their paper profits back in, buying up to $1 billion of risky assets, including mortgage securities, from the bank’s books. Over a third of participants opted in to a similar offer late last year. Some of the purchases are to be funded by leverage, leaving perhaps half to come from willing PAF holders.
Phrases like “risky assets, including mortgage securities,” are always a bit of a minefield, but the sense is clear enough, which is that a whole lot of senior people at Credit Suisse are pretty keen to take money that is basically theirs, which is currently held in the form of basically cash, and invest that on a ~2x levered basis in, er, “risky assets, including mortgage securities,” which let’s just stipulate have a higher risk and higher return than cash.
How would you describe those people? Read more »