HSBC boss backs Swiss account as profits slip

HSBC's boss on Monday fended off criticism about receiving his bonuses through a Swiss bank account held by a Panamanian-registered company, as the banking giant reported a 15-percent drop in annual net profits.

HSBC boss backs Swiss account as profits slip
HSBC chief executive Stuart Gulliver. Photo: AFP

Chief executive Stuart Gulliver was forced to react to a report about his finances in The Guardian newspaper, which has led coverage in Britain of an international tax-dodging scandal at the bank's Swiss division.
"I pay full UK tax on my entire worldwide earnings," Gulliver told reporters in a conference call, adding that the report about his account had not "in any way" impacted his leadership of the London-based bank.
He also admitted, however, that some of the practices of HSBC's Swiss private banking arm in the past had been "a source of shame and reputational damage" and said he considered them "very unacceptable".
The report on Gulliver came after claims that HSBC helped clients from around the world dodge taxes on accounts containing $204 billion, which are being investigated in several countries and have caused a political storm in Britain.
The scandal has tarnished the reputation of HSBC, which was quick to react to the latest allegations.
HSBC's chairman Douglas Flint said there was "absolutely nothing that Stuart has done that is other than transparent, legal and appropriate".
The bank explained in a statement emailed to AFP that Gulliver had opened his account in 1998 when he was working in Hong Kong and had put it in the name of a Panamanian company "for reasons of confidentiality".
It said Gulliver, who moved to Britain from Hong Kong in 2003, had "voluntarily declared his Swiss account to UK tax authorities for a number of years".
The bank apologized again on Monday over the so-called "SwissLeaks" allegations, saying they served as a reminder "of how much there still is to do and how far society's expectations have changed in terms of banks' responsibilities."
HSBC also revealed on Monday that 2014 earnings plunged in a "challenging year" that was blighted by fines and compensation for mis-selling.
Earnings after taxation or net profits sank 15 percent to $13.7 billion last year, HSBC said in a separate results statement.
That compared with $18.7 billion in 2013 when its performance was also boosted by disposals.
Pre-tax profits tumbled 17 percent to $18.7 billion, which dashed expectations and sent HSBC's share price sliding almost six percent in London.
"2014 was a challenging year in which we continued to work hard to improve business performance while managing the impact of a higher operating cost base," Gulliver said in the earnings release.
"Profits disappointed, although a tough fourth quarter masked some of the progress made over the preceding three quarters," he added.
"Many of the challenging aspects of the fourth quarter results were common to the industry as a whole."
In early afternoon deals, HSBC's share price dropped 5.75 percent to 570.40
pence on London's benchmark FTSE 100 index of top companies, which was 0.34
percent lower at 6,891.60 points.

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Switzerland’s banks remain among the world’s most secretive

Despite the progress made over the years, the Swiss financial sector continues to be one of the least transparent in the world. But there is good news too.

Switzerland’s banks remain among the world’s most secretive
Switzerland remains one of the world's least transparent nations. Photo AFP

Switzerland is in the third place in the 2020 Financial Secrecy Index released by the non-governmental organisation (NGO) Tax Justice Network (TJN), which rates 133 nations based on their financial transparency.

Two other European countries, Luxembourg and the Netherlands, are also ranked among the top 10 least transparent nations on the TJN’s list.

Despite being in the third place, Switzerland ranks better this year than it did in the previous edition of the Index, which is released every two years — it slipped from the first to third place. The Cayman Islands and the United States took the first and second spots, respectively.

Switzerland reduced its risk of being an offshore haven for tax cheats by 12 percent, “finally improving enough to move off the top of the index”, TJN said. 

READ MORE: Switzerland's strangest taxes – and what happens if you don't pay them

This improvement is mainly due to Switzerland extending its international network for the automatic exchange of customer information to more than 100 countries. 

Also, in a referendum held last year, Swiss voters accepted the Federal Act on Tax Reform and AVS Financing (TRAF). This legislation introduced major changes in the Swiss tax system by ending some preferential tax schemes and replacing them with new regulations which are in line with international standards.

This tax reform prompted the European Union to change Switzerland's status from ‘tax haven' to one which is EU-compliant, removing strict controls on transactions within the EU. 

So why, despite all the reforms, does Switzerland still rank among the world’s least transparent nations?

According to a Swiss NGO Alliance Sud, wealthy people from poor countries can still hide their money here from the tax authorities of their home nations.

Alliance Sud noted that despite the progress made in the past years by Swiss financial institutions, “the fight against tax evasion remains insufficient”.

Switzerland is the world’s biggest centre for managing offshore wealth, with a quarter of global assets invested here.

For years, it has been placed on various lists of tax havens where wealthy foreigners could park their money. Faced with widespread criticism for this practice, Switzerland passed an anti-money laundering law in 1997 and introduced strict regulations against tax evasion.