A quick note on how our government’s regulatory overreach is affecting even the EU’s banking system, courtesy of Spiegel On Line International.
It’s been noticed that American money is rapidly departing European banks, and one reason for this is fear for the safety of those banks and, from that, fear for our money in those banks.
There’s another reason for that concern, and the departure of American money, though. American money is being kicked out of the European banks by those banks. It seems that, due to stricter tax reporting requirements pushed through by the Obama administration and the Progressive Congress in 2010, EU banks are reluctant to accept or retain our business. The Foreign Account Tax Compliance Act (FATCA) was passed in 2010, and it takes effect January 2013. FATCA requires all foreign banks to identify and report all US citizens who have accounts greater than $50,000, all in an effort to clamp down on tax evasion. If the banks refuse to comply, they face a punitive 30 per cent withholding tax on all payments from the US. Never mind that under German (and many other nations’) laws, it’s illegal to give up much of the information FATCA demands.
It gets better. FATCA also hits foreign banks that have investments in the US or that are part of an expanded affiliated group that includes e participating foreign financial institutions doing business in the US—even if those banks have no US customers.
DWPBank, which handles securities transactions for 1,600 German banks—the primary type of account that would be affected given that minimum account size—estimates the total cost of compliance in Germany alone to be as much as €10 billion ($13 billion). A senior manager with JPMorgan Asset Management in Germany also notes that all the benefits, an estimated $8 billion in increased tax revenue over 10 years, accruing from this cost go entirely to the US.
Already, HypoVereinsbank has decided to stop many of its services for American customers as of 1 January 2012, while Duetsche Bank cancelled its accounts of its type last summer. Commerzbank (already in trouble from the debt crisis, and at risk of being nationalized by the German government) is “considering a similar move.” The cancellations aren’t limited to German financial institutions: HSBC, of Great Britain, will no longer service such large American accounts, and Credit Suisse, of Switzerland, has made the same decision. The latter’s move, though, also could be related to US pressure on the Swiss government to alter Swiss banking laws to allow Swiss banks to report on US account holders.
Of course there’s another result to all this, also. Americans in Europe may have trouble finding banks who want our business.