Switzerland shifts gold off the books in preparation for Basel III

Swiss banks move private investors to institutional accounts.

Contrary to popular myth, there are at least a few Swiss people who won't shy away from a fight. One of them is Nicolas Pictet, chairman of the Swiss Private Bankers Association.

The American Internal Revenue Service (IRS) has been duffing up the Swiss banking industry for quite some time now. Some of the biggest Swiss banks have had to surrender their US client list to the IRS under subpoena, and the US tax authority has been dogged in its pursuit of those US citizens they have found to be using the international banking system to avoid domestic tax requirements — even little old ladies.

Now, Pictet has decided enough is enough… it is time for the banks in question to stand up and if not hit back, at least defend themselves properly.

This week we saw another move that is likely to alter the perception of Swiss banks. UBS and Credit Suisse, two of the banks at the centre of the IRS investigations, significantly raised their charges for holding gold — making it very unattractive for private individuals to deposit the precious metal with them.

The primary reason for the decision was not to stick it to the IRS, of course. Rather it is to move gold off the banks' balance sheets ahead of the introduction of the Basel III rules, which require them to change the ratio of capital to assets.

The banks are encouraging clients to move their gold deposits to “allocated” accounts, which sit outside the banks’ balance sheets and generally attract far larger fees, and are primarily aimed at institutional investors.

The rise in charges on “unallocated” will undoubtedly discourage private individuals from keeping gold on deposit with Swiss banks. One gold market analyst told me the banks were now “terrified of US clients, who account for a significant proportion of their client base”.

“The Basel III requirements are providing the banks with a good excuse to get rid of their American clients,” they said.

So is it a case of Swiss banks reflecting some of the IRS’s heat onto its US clients? That would probably be to cut off their nose to spite their face, since there are plenty of other places investors can keep their precious metals.

But it will undeniably cause private investors, both in the US and elsewhere, problems. For many, there is no more solid investment than bars of gold, and nowhere more secure - or private - to keep them than a Swiss bank.

Either way, those banks are changing their rules. And with Basel III deadlines ramping up we are likely to see even more drastic changes to the private banking landscape.

Most of those changes are likely to further weaken the relationship between Swiss banking institutions and their clients. As Pictet told his compatriots: “[Switzerland] runs the risk of being dropped from the squad and finishing the race out of time, in the complete indifference of the political world.”

While shifting gold deposits off the balance sheet might help in some way to pacify the IRS, the result may well be the erosion of Switzerland’s position in the global banking world – leaving a lot of people holding out for a turnaround in the cuckoo clock market.

Photograph: Getty Images

James Ratcliff is Group Editor of  Cards and Payments at VRL Financial News.

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An alternative Trainspotting script for John Humphrys’ Radio 4 “Choose Life” tribute

Born chippy.

Your mole often has Radio 4’s Today programme babbling away comfortingly in the background while emerging blinking from the burrow. So imagine its horror this morning, when the BBC decided to sully this listening experience with John Humphrys doing the “Choose Life” monologue from Trainspotting.

“I chose not to choose life: I chose something else. And the reasons? There are no reasons. Who needs reasons when you’ve got Radio 4?” he concluded, as a nation cringed.

Introduced as someone who has “taken issue with modernity”, Humphrys launched into the film character Renton’s iconic rant against the banality of modern life.

But Humphrys’ role as in-studio curmudgeon is neither endearing nor amusing to this mole. Often tasked with stories about modern technology and digital culture by supposedly mischievous editors, Humphrys sounds increasingly cranky and ill-informed. It doesn’t exactly make for enlightening interviews. So your mole has tampered with the script. Here’s what he should have said:

“Choose life. Choose a job and then never retire, ever. Choose a career defined by growling and scoffing. Choose crashing the pips three mornings out of five. Choose a fucking long contract. Choose interrupting your co-hosts, politicians, religious leaders and children. Choose sitting across the desk from Justin Webb at 7.20 wondering what you’re doing with your life. Choose confusion about why Thought for the Day is still a thing. Choose hogging political interviews. Choose anxiety about whether Jim Naughtie’s departure means there’s dwindling demand for grouchy old men on flagship political radio shows. Choose a staunch commitment to misunderstanding stories about video games and emoji. Choose doing those stories anyway. Choose turning on the radio and wondering why the fuck you aren’t on on a Sunday morning as well. Choose sitting on that black leather chair hosting mind-numbing spirit-crushing game shows (Mastermind). Choose going over time at the end of it all, pishing your last few seconds on needlessly combative questions, nothing more than an obstacle to that day’s editors being credited. Choose your future. Choose life . . .”

I'm a mole, innit.