While the reputation of Liechtenstein's financial center may have suffered
as a result of the German tax affair, it appears that no significant damage has been done by
the subprime crisis, according to the annual report from the jurisdiction's Financial
Market Authority.
The report has concluded that new markets for Liechtenstein's financial institutions
in the Middle East and South East Asia have buttressed another year of strong
growth for the jurisdiction's' financial services industry.
"Despite the subprime and banking crisis as well as turbulent financial
markets, the 2007 business year of Liechtenstein financial service providers
was successfully concluded with above-average increases in growth and earnings."
stated Mario Gassner, acting CEO of the General Management of the Liechtenstein
Financial Market Authority (FMA), during the presentation of the FMA's 2007
Annual Report.
By the end of 2007, 2,089 financial market participants domiciled in Liechtenstein
were subject to FMA supervision: banks, investment undertakings, asset management
companies, and pension schemes. In comparison with the previous year, this represented
an increase of 10%.
The assets under management of all financial market participants increased
in the 2007 business year from CHF228.9bn (USD217.1bn) to CHF277.7bn. This represents
an increase of 21.3%. The 16 banks licensed in Liechtenstein managed client
assets of CHF201.3bn, corresponding to an increase of 16.1%.
Investment undertakings
grew by 14.2% to CHF30.5bn. Asset management companies recorded growth of 92.1%
to CHF21.5bn. With an increase of 43.9%, insurance companies also achieved a
surge in growth to CHF21.3bn. Pension schemes grew by a more modest 6.9% to
CHF3.1bn.
The responsibilities of the FMA as an independent and integrated supervisory
authority include guaranteeing the stability of the financial center.
The FMA
is not a central bank, but – according to Mario Gassner – it
must ensure that negative occurrences among individual financial intermediaries
do not have an effect on the financial center as a whole. This means that the
FMA must recognize developments and therefore potential risks to the financial
center early on and act accordingly.
For this reason, the FMA has established
ties with the Swiss National Bank, and intends to deepen this dialogue further.
The responsibilities of the FMA also include ensuring compliance with recognized
international standards.
At its presentation of the 2007 Annual Report, the FMA also addressed the current
developments concerning the German tax affair, which was triggered by the theft
of client data from a Liechtenstein trust company.
"For the FMA, the primary concerns were data security and the protection
of client data, as well as the impact on the financial center as a whole. Over
the last few months, the FMA has been under considerable pressure in dealing
with these events, in addition to its daily business."
"Despite these turbulent
times, it immediately took the necessary supervisory measures in a calm but
decisive manner and sent clear signals to those involved. Because of official
secrecy, the FMA is unable to give detailed information on the cases in question,"
the Authority stated.
The FMA believes that the reputation of Liechtenstein and its financial center
have been damaged by the events.
At the same time, however, the FMA noted that
cooperation among financial center actors functioned smoothly during the crisis.
It observed that the financial center system remained stable, but that the country
cannot afford to sit back, and that financial centre reforms must be implemented
rapidly.
According to the FMA, the subprime crisis has not entailed any direct risks
for Liechtenstein banks, since no investments in the affected securities were
made.
When the problems on the US real estate market and the resulting subprime
and banking crisis became apparent, the FMA immediately obtained a picture of
any relevant risks from the banks, insurers, and pension schemes.
Some life
insurers had invested directly in US mortgage-based products, but the amounts
were modest, and the products only affected life insurance policyholders bearing
their own risk.
The FMA confirmed that: "The subprime crisis and the resulting banking
crisis therefore has no major impact on the Liechtenstein financial center."
However, it add that the impact will be felt due to the resulting financial
crisis, which has adversely affected the stock markets."
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