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.




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UBS shares slide despite soaring profits for 2015

Swiss banking giant UBS on Tuesday posted a 79-percent higher net profit for 2015, beating analyst expectations, with tax benefits offsetting a difficult fourth quarter hit by market turmoil.

UBS shares slide despite soaring profits for 2015
Photo: AFP

Last year, Switzerland's largest bank raked in a net profit of 6.2 billion francs ($6.1 billion), it said in its earning statement.
“Despite a very challenging environment, we had an excellent year,” UBS chief Sergio Ermotti said in the statement.
Investors were not convinced.

After UBS released its results, it saw its share price shrink more than seven percent to 15.50 francs a piece as the Swiss
stock exchange's main SMI index dipped 1.5 percent.
The bank acknowledged that its “fourth quarter was characterized by very low levels of client activity and pronounced risk aversion.”
But thanks to a hefty net tax benefit, UBS still easily outperformed expectations.
For the October to December quarter, the bank posted a net profit of 949 million francs, up from 858 million a year earlier.
Analysts polled by the AWP financial news agency had expected UBS to post a net profit of 626 million francs for the quarter.
UBS said its fourth quarter result included a net tax benefit of 715 million francs, mainly linked to an “upward revaluation of deferred tax assets”, counterbalanced by 365 million francs in provisions for litigation and regulatory matters.
The quarter also included a charge of 257 million francs linked to a debt buyback programme.
UBS's vital wealth management division meanwhile saw its adjusted profit before tax swell 13 percent in 2015 to 2.8 billion francs — its best result since 2008.
And it pulled in 22.8 billion in new money under its management during the year.
But during the final quarter of the year, the division saw its operating profit plunge 47 percent to 344 billion francs “amid very low levels of client activity,” UBS said.
And during the quarter, net new money outflows ticked in at 3.4 billion francs as clients, especially in emerging markets and Europe, liquidated their positions to reduce debt, more than offsetting continued inflows from the Asia Pacific region and Switzerland.
The US wealth management division, which is counted separately, had an even rougher quarter, seeing its operating profit plunge 94 percent to just $13 billion amid “substantial charges for litigation, regulatory and similar matters”.
The investment bank division meanwhile posted a 1.8-billion-franc profit for the year, but was slammed in the fourth quarter by the global market slowdown, seeing its operating profit slump 63 percent to 80 million francs.
Looking forward, the bank acknowledged that the macroeconomic challenges it has been facing were “unlikely to be resolved in the foreseeable future.”
“Negative market performance and substantial market volatility since the start of 2016, low interest rates, and the relative strength of the Swiss franc, particularly against the euro, continue to present headwinds,” UBS said.
The bank said it aimed to pay a 2015 dividend to shareholders of 0.60 francs per ordinary share and a special dividend of 0.25 francs.