The world's largest wealth manager, UBS, has been mired in a
world of woes, which shattered its reputation for Swiss solidity. In
a bid to become the world's largest investment banker, the
Zurich-based bank, once known for its conservative
investment strategy, began to heavily invest in risky subprime mortgage securities
only to become the biggest European casualty of credit crunch. The latest tax
debacle has only worsened things for the beleaguered Swiss banker. Indeed,
February 18, 2009 was a day of reckoning in the history of UBS and the Swiss
banking sector, when UBS agreed to pay $780 mn fine and divulge the details of nearly
300 of its US clients. In a case of defrauding the Internal Revenue Service of
the Americans, UBS was suspected of helping its US clients in using offshore
accounts to evade taxes.
This raised concerns about the value of its shares which are on a free fall
and also about the prosperity of the well-paid Swiss banking secrecy till
date. The investment bank, which has been facing losses for the past few years,
has reported a further slump in revenues. Marking the highest ever loss in the
history of Swiss banking, it recorded a loss of 19.7 bn Swiss francs ($16.8 bn)
during 2008. The bank deposits fell by 27% on February 23, 2009, amounting to
a meager 3.82 tn Swiss francs from 1.14 tn Swiss francs ($1.21 tn) in 2005.
Consequently, according to Swiss National Banks monthly report, the
deposits from foreign customers shrank by 882 bn francs, while Swiss customers'
deposits fell by 531 bn francs from 2008. Foreign private customers saw
the highest proportional drop in assets of 36% or 371 bn francs, leaving
only 671 bn francs worth of deposits in Swiss vaults. That is the lowest
deposit amount from foreign private customers since the end of 1998. All in all,
Switzerland is struggling hard to hold on to its fabled banking secrecy after US
government decided to go tough on tax frauds. Thus,
Switzerland's tradition of banking secrecy has come under renewed
pressure as the US takes on the nation's largest financial institution.
|
