UPDATE 2-France's Hollande pledges more transparency for banks, politicians

Wed Apr 10, 2013 9:47am EDT

Related Topics

* Hollande appoints specialised financial prosecution office

* Banks will be forced to publish lists of subsidiaries and their activities

* Moves come after former minister's secret foreign account stunned France (Recasts adding lawyer quote, detail)

By Ingrid Melander and Lionel Laurent

PARIS, April 10 (Reuters) - French banks must give more details on their operations in tax havens, while ministers will disclose personal assets from next Monday, President Francois Hollande said in a drive to restore public trust after a tax fraud scandal.

Seeking to show he is improving transparency after his budget minister quit over a secret Swiss bank account, Hollande pledged to step up the fight against tax havens. He also appointed a specialised financial prosecution office.

"For the sake of the French people, we aim to ensure that those who govern them, those they have elected ... are not getting richer in the course of their mandate," Hollande told a news conference on Wednesday.

He spoke as neighbouring Luxembourg's prime minister announced plans to lift bank secrecy rules from 2015 for European Union citizens who have savings there, bringing it into line with other EU countries.

Former budget minister Jerome Cahuzac stunned France last week by acknowledging, a fortnight after quitting his post amid allegations of tax fraud, that his denials of holding a secret foreign bank account had been lies.

Cahuzac's resignation came as a major embarrassment for Hollande, who had promised to upheld high moral standards in public life while in office. His approval rating is at record lows as unemployment rages near a 15-year high.

To improve the fight against tax fraud, banks will have to make public each year a list of their subsidiaries, along with their activities, staff and turnover, tax paid and any state aid.

"In other words it won't be possible for a bank to hide transactions carried out in a tax haven," Hollande said.

French banks including BNP Paribas and Societe Generale currently publish the names, ownership interest and locations of units in all markets including low-tax administrations like Bermuda, Luxembourg and Jersey.

Moreover, a draft bank reform law already asks banks to report revenues and staff on a country-by-country basis, something bank executives say puts them at a competitive disadvantage.

There are some exceptions. Special purpose vehicles (SPVs), entities created to fund securitisation deals, are off-balance-sheet and not consolidated by the banks, and therefore not declared.

"There is still a question mark on what these measures will apply to," said lawyer Hubert de Vauplane, a partner at Kramer Levin Naftalis & Frankel, noting Hollande's announcement was sufficiently vague to avoid any kind of real change to existing loopholes. "What do we mean by 'subsidiary'?" he asked.

In public life, an independent authority will monitor ministers' asset declarations while a special prosecutor's office will focus on major corruption and fiscal fraud cases.

Opposition lawmakers talked of "diversionary tactics" and kept pressing for more action.

"It is a diversionary operation that is absolutely not up to the challenges of the scandal that discredits the government," said Christian Jacob, lead lawmaker for the conservative UMP party in parliament. (Writing by Ingrid Melander; Editing by Mark John)

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