According to The Asian Banker, Moody’s said in a report: “While making cross-border transactions faster and less expensive would be credit positive for banks, these efficiencies could also compress their fees and commissions, a credit negative.”

Switzerland ranks third on Moody’s report which highlights the list of countries that handle cross-border transactions relative to GDP.

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October 11, 2016: Falcon Private Bank, a Swiss private banking boutique with 50 years of expertise in wealth management, has lost its banking licence in Singapore as a fall-out of the 1MDB case.

The Swiss Financial Market Supervisory Authority (FINMA) and the Monetary Authority of Singapore (MAS) have completed their investigation around Falcon Private Bank’s involvement in the 1MDB case and have notified the bank about their decisions. The investigation was into allegations of misappropriation from Malaysia’s state investment fund 1Malaysia Development Bhd (1MDB) and that the money made its way into Malaysian Prime Minister Najib Razak’s personal bank accounts. Prime Minister Najib Razak and the 1MDB have denied any wrong-doing.

Falcon Private Bank was among those embroiled in the scandal along with several other institutions and individuals. Falcon Private Bank and its shareholder Aabar have welcomed completion of the investigation. Since 2013, the bank has further enhanced its compliance, invested in additional resources as well as reviewed the organisational setup and relevant processes. Furthermore, based on the findings of the regulators, Falcon Private Bank has initiated additional measures to prevent future issues.

With its committed staff, strong capital base and high liquidity ratio, Falcon Private Bank will now concentrate on further growing its franchise. The bank provides financial services to private clients and wealthy families from its headquarters in Zurich and locations in London, Singapore, Abu Dhabi and Dubai.

But now, its Singapore banking licence has been withdrawn. The bank is currently in contact with employees, clients and partners and is committed to finding optimal solutions for all parties involved and guaranteeing an orderly winding down of the Singapore operation.

Walter Berchtold, Chief Executive Officer of Falcon Private Bank, said, “We have been in close collaboration with the regulators and welcome that the 1MDB case has been closed with the regulators. Falcon Private Bank adheres to all rules and regulations, is well capitalised, enjoys a strong balance sheet and the full support of our shareholder Aabar. The bank will now focus again on growing our businesses in the core locations Switzerland, Middle East and London. We are highly confident of our expertise to create a long-lasting, positive customer experience.”

Murtadha M. al Hashmi, Chairman of the Board of Directors, added, “I am pleased that the 1MDB chapter could be settled and very confident that the bank will develop positively on its way to long term growth. Aabar, as shareholder of the bank, remains fully committed to supporting Falcon Private Bank on this future path.”

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July 19, 2016: Deposit Solutions, the first open architecture platform for retail deposits in Europe, has started Deposit Solutions CH GmbH. It has named Thomas von Hohenhau as its  country manager, Switzerland. The Swiss branch marks the next cornerstone in the transformation of the EUR 9 trillion European market of retail savings deposits and the company’s European rollout. In April this year, it announced the appointment of Max von Bismarck as chief business officer and managing director for the international expansion.

Switzerland is one of the world’s most important financial centres with over CHF 700 billion of retail deposits. Swiss savers are losing millions of Swiss francs every year as their deposits’ interest rates have dropped below inflation. Many Swiss banks hold an excess of retail deposits on their balance sheet, which they currently need to park with negative rates being enforced by the Swiss National Bank. Deposit Solutions operates a new open architecture platform for retail deposits which provides a win-win solution for both savers and banks.

Dr. Tim Sievers, founder and CEO of Deposit Solutions: “With Thomas von Hohenhau, we have succeeded in recruiting an experienced banking expert with in-depth knowledge, an outstanding track record and extensive international management experience. This makes him the ideal executive to lead the expansion of Deposit Solutions’ activities into Switzerland as one of the world´s key savings markets as well as to help drive our further growth strategy in Europe.”

Von Hohenhau spent seven years at the leading Swiss private banking group Julius Baer, covering various senior management positions in Switzerland and around the globe. In his last mandate at Julius Baer, he served as Head Portfolio Management International and was responsible for nine international portfolio management units in Europe, South America and Asia. Previously, he was Global Head of PM Business Operations & Management and led the integration of Merrill Lynch’s Portfolio Management into Julius Baer. Before joining Julius Baer, von Hohenhau was involved in various ICT start-ups as a co-founder and business angel.

“As one of the biggest savers markets worldwide, Switzerland is predestined to be the next major building block in the European growth strategy of Deposit Solutions. As one of the leading financial centres in the world, it can also serve as a great basis for our further expansion in Europe. I am very excited to join such an innovative player in the financial ecosystem and look forward to supporting Deposit Solutions in further growing out its position as leading open architecture platform for deposits”, said von Hohenhau.

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But,what next for the Swiss franc and the country’s economy

January 22, 2015: On January 15, the Swiss National Bank (SNB) shocked the capital markets by unexpectedly removing the EUR/CHF peg set at 1.20. The move caught many offguard and sent the Swiss Franc (CHF) into the stratosphere, rising about 40% in a mere 30 minutes.

The International Monetary Fund’s head, Christine Lagarde, called the move “a bit of a surprise”. Watchmaker Swatch saw its share price slump 15%. Mark Haefele, chief investment officer of Swiss bank UBS, estimated that the move would cost Swiss exporters close to 5bn Swiss francs, equivalent to 0.7% of Swiss economic output.

The carnage was not limited to businesses in Switzerland. Residents in Eastern Europe also felt the sting, as their home mortgages, denominated in CHF, became instantly more expensive. Several currency brokers were not spared either. FXCM, one of the world’s largest forex brokers, announced a negative equity of $225 million and had to be injected with $300million of fresh capital from Leucadia National. IG Markets reported a loss of £30millionwhile Interactive Brokers reported a loss of $120 million.

To understand the reason behind the SNB move, it is prudent to look back a little on history. In September 2011, the SNB announced a peg on the EUR/CHF, setting a floor rate of 1.2. This means that it would not allow the CHF to strengthen against the euro beyond that rate. To defend that level and keep the CHF relatively weak, the SNB had to keep buying euros. This action swelled the SNB’s balance sheet to the tune of 500 billion CHF, which accounted for 80% of its GDP. This is the highest level among the major central banks in US, UK, Europe and Japan.

Here’s some quick thoughts. Firstly, it costs money to intervene in the currency markets or in this case, to “defend a peg”. Secondly, the problem starts to compound because the value of the euro is steadily declining.

Now, keeping the EUR/CHF peg would swell the SNB’s balance sheet even more and make it “top heavy with euro-denominated assets”. At current levels, as much as 40% of their FX reserves are held in euros. This would make Switzerland more sensitive to swings in FX reserves.

With the impending announcement from the ECB on January 22, which is expected to bring about Quantitative Easing (and thereby weakening the euro more), the SNB made a calculated decision to remove the peg now and cap its losses. If the peg is still in force when the ECB announces QE, the SNB would be forced to buy more euro assets to limit the rise in the CHF and potentially incur more losses.

Had it kept the peg, SNB assets could easily surpass 100% of GDP after the expected QE announcement from the ECB and losses due to the subsequent euro weakening could fatally impact Switzerland’s treasury.

Short EUR/USD at 1.1620

On the H1 chart, prices on EUR/USD are moving in a downtrend. With US consumer confidence at an 11-year high of 98.2 and with the impending QE announcement from the ECB this week, the divergence in monetary policy between US and Europe is very much intact. This gives rise to an excellent short opportunity on the EUR/USD.

An aggressive entry is taken at 1.1620, about 30 pips below the resistance level of 1.1647. I expect prices to head up from current levels just prior to the QE announcement before resuming its downtrend. A stop loss of 50 pips is placed above the resistance and we will have two targets on this trade, exiting the first position at 1.1570 and the second one at 1.1520.

Entry Price = 1.1620

Stop Loss = 1.1670

1st Profit = 1.1570

2nd Profit = 1.1520

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Dealing a huge blow to Switzerland’s historic banking secrecy, Swiss finance officials on Wednesday approved a plan that would allow the country’s banks to disclose details of their businesses that handle American clients to U.S. authorities investigating offshore tax evasion. Switzerland’s Finance Minister, Eveline Widmer Schlumpf said the country is taking action on banks which are suspected of aiding American tax cheats. She said the aim of this deal with the banks is to ‘restore stability’ to the Swiss banking industry. Speaking in a news conference in Bern, she said “We’re convinced that it’s a good pragmatic solution that really helps the banks resolve this issue”. The legislation will be put forward before the parliament by June this year due to mounting pressure by the U.S. authorities which could bring criminal charges against large banks and open investigations against other banks protecting American tax cheaters. The measure, which is scheduled for special consideration by the Swiss Parliament later this year, would also allow the banks to disclose information about employees who were working with bank divisions that worked with American clients possessing secret accounts. The treaty would also mean that American authorities can make more precise requests for information about individuals within the framework of the existing double tax treaty between Bern and Washington. Until now, Switzerland’s bank secrecy laws have prevented its banks from complying with American requests for information about their activities in the U.S..  Switzerland’s biggest bank UBS had admitted in 2009 that it had helped thousands of clients avoid paying U.S. taxes. UBS was fined $ 780 million and was asked to divulge the details of more than 4,000 clients to avoid indictment.

In January, Switzerland’s oldest private bank, Wegelin & Co, became the first foreign bank to plead guilty in the United States to face charges when it admitted that it helped American clients hide more than $ 1.2 billion from IRS (Internal Revenue Service). The bank which has a history of 270 years has closed down after admitting to helping American tax cheats. Other Swiss banks including UBS and Credit Suisse have been hauled by U.S. prosecutors for helping American tax cheats to hide their money in their banks. In order to avoid embarrassment to other banks the Swiss government has outlined a ‘draft law’ to enable Swiss banks to disclose information to U.S. authorities. The law would enable U.S. authorities to provide information about their clients and employees for a period of one year. However, they would not be able to provide information on the identities of the clients.

The new law introduced on Wednesday must be now debated before the Swiss Parliament, which would sit in the month of June. The biggest party in the Swiss Parliament, Swiss People’s Party (SVP) said it would reject the proposal. Martin Press, a tax law specialist in Switzerland opined the proposal as a “tremendous weakening” by Switzerland and its banks. If the law is approved by the Swiss Parliament, the plan would prompt many U.S. clients to approach the IRS with information about their Swiss accounts under a voluntary disclosure leniency offer. Swiss secrecy has also suffered heavily, recently a bank employee sold stolen client data to foreign tax authorities. Herve Falciani, a former employee of HSBC in Geneva, whose stolen data enabled tax authorities in Spain and France to pursue investigation and trial against hundreds of tax evaders. The Spain’s National Court also turned down a demand to extradite Mr.Falciani to Switzerland to face trial for data theft.

Switzerland’s tradition of bank secrecy has helped to make it the world’s biggest financial offshore financial centre with assets to the tune of more than $ 2 trillion.

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