* Banks, insurers must mitigate risks from cross-border ops
* Regulator FINMA says could enforce necessary steps
* New push reaction to banks' legal troubles abroad
(FINMA comments, details, background)
By Robin Bleeker
GENEVA, Oct 22 Swiss regulators will keep an eye
on banks and insurers to ensure they are complying with laws and
regulations abroad, with the management of risks from
cross-border business a part of their regular supervision.
In a position paper presented in Geneva on Friday, Swiss
financial market regulator FINMA told banks and insurers in the
country they must know the rules abroad and take steps to
mitigate or eliminate risks stemming from cross-border business.
Should banks and insurers fail to take all necessary
measures to ensure compliance with regulations in countries
where they are doing business, FINMA could force them to act
under current legislation.
Swiss banks have come under heavy fire abroad as governments
hunt down tax cheats, and Switzerland has had to soften its
cherished bank secrecy, caving in to global pressure.
The government and regulators have vowed to end the
country's history as a safe place for tax evaders and pledged to
allow in only taxed money in the future.
"Risks have always been there. But laws toughened in some
countries while others simply decided to apply already existent
laws in a more systematic way," said Urs Zulauf, General
Counsel of the FINMA, at a media briefing in Geneva.
The regulators also said they had to be informed immediately
if a bank or an insurer faced legal troubles abroad.
To end a damaging tax case, the Swiss government had to
allow UBS to hand over to U.S. authorities the details of around
4,450 clients that UBS had helped to dodge taxes.
In Germany, the government has paid for stolen data from
Swiss banks to catch tax cheats and raided the German offices of
Switzerland's No.2 bank Credit Suisse CSGN.VX (CS.N).
FINMA position paper www.finma.ch/
The recent high-profile cases have highlighted the legal and
reputational risks associated with cross border-business, banks
and insurers must thoroughly assess their operations and the
risks attached, FINMA said.
"Appropriate measures to mitigate or eliminate risk must
also be taken," the regulatory body said.
"FINMA expects institutions to take due account of foreign
supervisory legislation in particular and to define a service
model appropriate for each individual target market," the
In some cases, banks or insurers may have to change their
strategy as a consequence of the risk assessment, FINMA said.
"Institutions may decide to dispense with cross-border
services in certain target markets, or the provision of services
to certain categories of clients, and to adjust their business
models accordingly," FINMA said.
Many Swiss banks have decided for risk-related reasons to
stop doing business with certain categories of U.S. clients or
to at least discontinue some services to them.
The regulator highlighted that all internationally active
financial institutions, including insurers, faced such risks,
not just banks.
FINMA particularly highlighted insurance wrappers, which
exploit tax benefits on investment income held in life insurance
policies and have become popular with wealthy clients.
(Additional reporting by Sven Egenter; Editing by Karen Foster)