The chief executive of EFG International (EFGN.S) said BSI will benefit from the Swiss private bank’s know-how after it completed the takeover of the troubled bank, which has been punished for its links to the scandal-hit Malaysian state fund 1MDB.
EFG last week completed the acquisition of BSI from Brazil’s Grupo BTG Pactual SA (BBTG11.SA) for a preliminary 1.06 billion Swiss francs ($1.09 billion).
But EFG said the BSI business had suffered net new money outflows of 17.8 billion Swiss francs ($18 billion) in the first 10 months of 2016 amid sanctions over its ties to 1MDB.
“We at EFG have a very good compliance regime,” Joachim Straehle told NZZ am Sonntag in an interview published on Sunday.
“We have been untouched by the big legal cases and have a good relationship to [Swiss financial watchdog] FINMA,” the chief executive said. “BSI will benefit from our know-how.”
In December 2015, EFG agreed to pay a fine of $29.98 million after signing a non-prosecution agreement with the U.S. authorities to settle claims it helped American clients open secret bank accounts to hide money from the tax authorities. In March last year, BSI agreed to pay a $211 million penalty to settle similar claims.
In May, FINMA closed down BSI’s operations in the city-state, while Switzerland has launched criminal proceedings against the bank, in the biggest international crackdown on financial entities dealing with the Malaysian government fund 1MDB.
FINMA said at the time that it found BSI in breach of money- laundering regulations in connection with 1Malaysia Development Berhad.
“We have gone into this acquisition with open eyes,” Straehle said in the interview. “We knew the risks,” he added, although he said the hard approach of the regulators had been unexpected.
He justified the deal by saying scale was increasingly needed in the Swiss banking industry.
“A certain size is necessary to operate profitably,” he said. “If you manage 60 to 90 billion, you can’t do it anymore unless you are very successful in a certain niche.”
The combination of the two banks meant combined assets under management of 148.9 billion Swiss francs, which gave the group “critical mass,” he said.
(Reporting by John Revill; Editing by Larry King)
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Source: Reuters.com