Rothschild mulls U.S. private client licence

* Rothschild may apply for U.S. private client licence

* Application to SEC could be submitted in a few months

* New laws mean hike in compliance costs for non U.S. banks

LONDON, Sept 23 (Reuters) - Anglo-French banking group Rothschild ROT.UL may apply to United States authorities for a private client licence, two sources with knowledge of the matter said, as regulatory burdens on non-U.S. banks mount.

The bank could submit an application to the Securities and Exchange Commission (SEC) for a licence to operate in the U.S. within a “few months” one of the sources said.

A spokesperson for Rothschild confirmed the bank is considering the application to enable it to deal with more offshore clients from the U.S, but stressed it would not represent a push into the U.S. wealth management market.

The second source said the bank is thinking about the move in part because of a new U.S. law that will impose greater regulatory requirements on foreign financial institutions to disclose client details to tax authorities.

Under the new rules, enacted earlier this year and currently under consultation, foreign banks will have to disclose details of U.S persons with accounts or face a 30 percent tax on investments in U.S. assets. [ID:nN27101966]

A report from law firm Withers said the scheme “may be the broadest tax and information reporting legislation ever enacted, potentially affecting... virtually all non-U.S banks, investment houses, brokerages, custody agents, mutual funds, hedge funds, private equity funds and life insurance providers, among others, with any investments in the U.S.”

Analysts fear the rules will prove to be a costly administrative burden on non-U.S. institutions and threaten profitability at smaller firms because of the broad scope of people deemed U.S. persons for tax purposes.

The category includes both citizens and permanent residents of the country, even if they no longer reside there, and could take in people with no real connection to the U.S. but have a theoretical right to citizenship through family connections.

Banks that cater to wealthy individuals mainly outside the U.S., such as Rothschild, are increasingly finding that many families that manage their finances through the institution have members that fall under U.S. jurisdiction.

According to the second source, having an SEC registered entity within the banking group could partially reduce the burden and more banks are likely to consider applying for U.S. licences.

But some in the financial services industry warn the rules could also lead to disinvestment from U.S. assets by some financial firms.

One chief executive of a British private bank who asked not to be identified said the new rules will reinforce a trend in international financial institutions refusing business from U.S. citizens.

It could also subdue ambitions by international firms to invest in the U.S, he added.

“This could impact (future) decision making on whether we want to expand into the U.S,” he said.

(Editing by Elaine Hardcastle)


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