ADVANI’S CLAIM: It doesn’t add up

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Published: Tue, 05/05/2009 - 07:08 Updated: Wed, 07/01/2015 - 09:52

Sanjay Kapoor Berne

FOR A FORMER journalist and now chief of International Communication of Swiss Bankers Association (SBA), anticipating questions would normally come easy. For James Nason though this task has become easier due to a barrage of questions that have been posed to Swiss bankers after the US pressured UBS to give details about American depositors. The fast-speaking Basle-based Nason met Hardnews in an old style Berne cafe and responded to all the usual questions about the mystery that surrounds Swiss bank account holders and the allegations of dubious funds.

Nason explained that Switzerland comprised a varied "banking landscape" and, in his reckoning, it would be wrong to paint them with the same brush. He explained that there were 330 Swiss banks and only 14 private banks. He was categorical that the Swiss banks followed strict laws and they did not really entertain funds from politically exposed persons. A paid website (factivadowjones.com) has a list of all such dubious people and most of the banks stay away from them.

He seemed ambivalent though when Hardnews asked him whether Swiss banks also refused funds from politicians who were in power. "Why should the Swiss banks touch dirty money and spoil their reputation?" He said that the Swiss banks could freeze a suspicious account for five days and allow the authorities to probe into it.

To questions about Indian funds stashed away in Swiss banks and the charge leveled by BJP's prime ministerial candidate LK Advani that the amount totaled some $500 billion, Nason in an email reply - a day later - claimed that the figures were exaggerated.

Nason informed that the Swiss National Bank publishes a figure for the value of securities (e.g. shares and bonds) held in custody accounts in Switzerland. At the end of 2008, it was a total of CHF 3,822 billion (1 CHF = Rs 43.3), of which CHF 2,190 billion (that is, 57 per cent or well over half) was managed on behalf of foreign institutional, corporate and private clients. The Swiss National Bank does not give a country by country breakdown of these figures, so there is no way of knowing what proportion of these securities are owned by Indian clients, be they government, institutional, corporate, commercial or private.

(Contrary to what some Indian commentators have claimed, this has nothing to do with Swiss privacy law. It is simply the way the Swiss National Bank collates and presents the figures.) The value of a custody account is not reflected in the balance sheet of a bank. Custody accounts are considered "off-balance-sheet" accounts.

India appears in two tables of the Swiss National Bank's annual yearbook of statistics. The first appearance of India is in the table (Table 32 on Page A 113) giving a country-by-country breakdown of assets and liabilities of Swiss banks according to their balance sheets. This shows that at year-end 2007, Swiss banks had CHF 2,923 million of liabilities towards India (that is, India had CHF 2,923 million worth of assets with Swiss banks). In comparison, the equivalent figure for China was CHF 15,650 million. This is not all private client money! It could also be central bank, government, institutional, corporate and commercial money besides private client money. CHF 1,202 million, for example, are liabilities owed to Indian banks! The second appearance of India is in Table 38 on Page A136 which gives a country by country breakdown of assets and liabilities in fiduciary transactions. This shows that Swiss banks had liabilities of CHF 1,383 million towards India. Once again, this is by no means all private client money.

If we add the first figure (CHF 2,923 million) together with the second figure (CHF 1,383 million), we get CHF 4,306 million. There is no way of knowing how this amount breaks down between government, central bank, corporate, commercial, institutional and private clients. One would also have to know the Indian proportion of the assets mentioned in the beginning (value of securities held in custody accounts) and the Indian proportion of any cash sitting in savings accounts and time deposits. As you can see, it is simply not possible to get a total figure for India. Anyone claiming to know the total amount should be asked to explain the method they used to calculate it.

I have been researching the Indian numbering system (lakh, crore, arawb, kharawb, etc.) It's so easy to get the comma in the wrong place or the wrong number of 000s when you try to convert.

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This story is from print issue of HardNews