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FRAUD

Swiss banks respond to offshore revelations

The CEO of Credit Suisse said on Tuesday the bank does not endorse offshore accounts for tax avoidance or shady dealings, the latest bank to defend itself against accusations made in the Panama Papers leak.

Swiss banks respond to offshore revelations
Photo: Emmanual Dunand/AFP

The scandal erupted on Sunday when media groups began revealing the results of a year-long investigation into a trove of 11.5 million documents from the Panamanian law firm Mossack Fonseca, which specialises in creating offshore shell companies.

Among those named in the Panama Papers are close associates of Russian President Vladimir Putin, relatives of Chinese leader Xi Jinping and Iceland's Prime Minister Sigmundur David Gunnlaugsson, as well as Barcelona striker Lionel Messi.
   
Major international banks, including Credit Suisse, were also named in the leak among those that requested the most offshore companies for clients.

According to the papers, Credit Suisse created 1,105 offshore companies and UBS 1,100.
   
Offshore companies are not illegal and can be used for legitimate business needs, but commonly feature in corruption cases where they are used to secretly move ill-gotten gains abroad.
   
Credit Suisse CEO Tidjane Thiam said on Tuesday they would only endorse “legitimate” offshore arrangements.
   
“We only accept offshore structures, vehicles if they serve legitimate purposes,” Thiam said, speaking in Hong Kong.
   
“Clearly, tax avoidance is not one of those,” he added.
   
“We insist on knowing who is the beneficial owner. If it's not revealed, we will not engage in business with that entity,” he added.

A UBS spokesman told AFP that the bank “conducts its business in full accordance with the applicable regulations”.
   
“The bank has no interest in funds which are not in line with fiscal rules or which come from illegal activity,” he added.
   
The Swiss banks' comments come after HSBC, another bank on the list of institutions that helped set up the most offshore accounts, also distanced itself from the revelations.
   
“The allegations are historical, in some cases dating back 20 years, predating our significant, well-publicised reforms implemented over the last few years,” spokesman Gareth Hewett told AFP in an emailed statement.

The trove of Panama Papers documents was anonymously leaked to German daily Sueddeutsche Zeitung and shared with more than 100 media groups by the International Consortium of Investigative Journalists (ICIJ). More revelations are expected over the coming weeks.

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MONEY

Is it easy for a foreign resident get a loan in Switzerland?

When it comes to borrowing money from a Swiss bank, nationality may play a role in some cases, but not in others. This is what you should know about this process.

Is it easy for a foreign resident get a loan in Switzerland?
Getting a losn in Switzerland is subject to many conditions. Photo by Claudio Schwarz/Unsplash

Like almost everything in Switzerland, consumer loans are regulated by legislation, in this case the Consumer Credit Act.

It defines a loan as between 550 and 80,000 francs, “offered by commercial providers of financial services”. Lower or higher amounts are not subject to the Consumer Credit Act.

As is the case in many other countries, Swiss banks have strict criteria about who they lend money to. After all, no financial institution wants to deal with people who are not creditworthy.

Whether or not a foreign national can borrow money from a bank depends on their permanent place of residence and permit status.

As a rule, Swiss lenders don’t give loans to non-residents. So if you reside abroad, there is practically no chance that a bank in Switzerland will lend you money.

However, some financial institutions make exceptions for cross-border workers. If you fall under this category, you can use this interactive tool, select “ Permit G” under “Residence Permit” and see what, if any, options, there are.

READ MORE: EXPLAINED: What cross-border workers should know about taxation in Switzerland

If you are a foreign national but have a permanent residence status (Permit C), your chances of getting a loan are practically the same as those of Swiss citizens — provided, of course, that you meet all the requirements set by lenders (see below).

What about other permit holders?

If you have a B Permit, you might be approved for a loan, depending on how long you have had this permit — obviously, the longer the better.

However, “you may be offered a higher interest rate or a limited loan amount. This is because of the statistically higher probability that you will return to your home country. Some lenders require the loan to be repaid by the time the B permit expires”, according to consumer comparison site comparis.ch 

Holders of other, temporary or conditional permits are not accepted.

What conditions — other than residence permit — should you fill to be considered for a loan?

You must be at least 18 years of age, though additional restrictions may apply to applicants under 25 — for instance, a higher interest rate or a limited loan amount. That’s because “lenders are generally more cautious with young applicants as their financial circumstances are usually less settled and the risk of default is deemed to be higher,” Comparis noted.

The same cautious approach applies to pensioners, especially those who have no regular income. The social security payments (AHV/AVS) do not count as income for the purpose of the loan.

There is also other eligibility criteria, based on employment status and salary. People with a regular income have a higher chance of obtaining a loan than those who are self-employed, temporarily employed, work on hourly basis or, logically, unemployed.

Other factors, including your existing debts, are also taken into account in the decision process.

Basically, lenders favour applicants with a stable income and good financial standing, in much the same way as supplemental health insurance carriers prefer young and healthy people.

Keep in mind that if your loan application is rejected, this will be recorded in the database of the  Central Office for Credit Information, making it more difficult, though not impossible, to get a loan in the future.

READ ALSO: Does having a good credit score matter in Switzerland?

The same rules do not apply to American citizens

That’s because Swiss and European banks are subjected to US demands to disclose the assets of Americans overseas in order to prevent tax evasion.

As adherence to these requirements is a major headache for the banks and in some cases also violates their country’s privacy laws, financial institutions prefer not to deal with Americans at all, even those who are permanent residents.

If you are a US citizen who also has Swiss nationality, you may have an easier time of it, but could still face hurdles in obtaining loans and other banking services.

There is no immediate relief in sight, although many organisations representing Americans abroad are lobbying in Washington to change the existing legislation.

READ ALSO: Why are Americans being turned away from Swiss banks?

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