Bankers say EU rules are "poison" for market

Swiss private bankers have described new European rules to create a single financial market as "poison".

They also asked the Swiss government for more time to consider new measures in the fight against money laundering, while urging the government not to adopt over-strict regulations to fight the problem.

Konrad Hummler, vice-president of the Swiss Private Bankers Association, said the regulations for the EU's Markets in Financial Instruments Directive (MiFID) would increase costs for investors and make life harder for smaller banks.

"[MiFID] is a guarantee for clients," Hummler said on Thursday. "And nothing comes without a price."

He said that the rules could also drive the cost of financial transactions up instead of down, as the rules intend: "My forecast is that it will put a premium on markets."

Under MiFID, which comes into force in Europe in November 2007, banks must assess whether their clients are suitable to bear the risks in financial instruments.

Hummler, also a partner at Bank Wegelin, said the rules might breach privacy laws because it means asking customers about their money in other banks.

There are no plans in non-EU member Switzerland – the world's largest haven for offshore money – to make its laws comply with MiFID, but Swiss banks will have to comply with the new framework in their operations abroad.

"Subservience"

Switzerland has already introduced rules to combat money laundering and terror financing, but the bankers called even stricter proposals by the Financial Action Task Force (FATF) uneconomical.

FATF is an inter-governmental organisation created in 1989 by the Group of Seven richest countries that develops and promotes national and international policies to combat money laundering and terrorist financing.

Pierre Darier, president of the Swiss Private Bankers Association, criticised a plan to make any market abuse such as insider dealing or price manipulation a crime rather than just an offence, saying not everything that went wrong in markets was because of criminal intentions.

"I think we all see that some forms of misbehaviour in financial markets are criminal. But some others are not ... and if you treat everything the same as major crimes ... you don't know how to differentiate," he said.

Darier said private bankers saw in the Swiss government's plans to introduce a slimmed-down version of the FATF recommendations next summer an "incomprehensible subservience".

He believed that before changing Swiss law to conform to these new international minimum standards, Switzerland should at the very least discriminate between serious market abuse and less grave matters.

"Think, then grovel," said Darier, a partner at Geneva-based private bank Lombard Odier Darier Hentsch & Cie.
Additional costs

The issue of criminalising insider trading and market manipulation has been a thorn in private bankers' eyes right from the beginning.

Bankers have always rejected these plans, fearing massive additional costs that would come with the obligation for executive care.

Darier spoke of the "trivialisation" of the term money laundering, which he said was normally linked to drugs trafficking and organised crime, and called on the finance and justice ministries to think long and hard about the principle of criminalising insider trading.

Private bankers did however fully support the tightening of the penal standards for insider trading, as agreed by the government at the end of 2006.

http://194.6.181.127/eng/swissinfo.html?siteSect=105&sid=74441105