UBS, CITADEL OF PROSPERITY BUILT ON BRICKS OF POVERTYThe world economy is in deep crisis. It requires huge amount of liquidity to tide it over. It is amply clear now that the market has plummeted due to excessive financial leverage. According to one estimate, in 1980, the leverage was up to 108% of the global GDP. In fact the trend of twisting and extracting excessively from the economy even beyond its limit had started after 1990s itself. Initially, this trend paid handsomely to the money makers and finance mangers and they thought that it is the secrets of economic success. The so called boom in sectors like housing, IT, service, capital markets etc was perhaps due to this leverage also. The bottomless greed of money makers, MNCs and TNCs brought the leverage percentage up to sky soaring level of 600% of the global GDP in 2007. It is estimated that in 2007 global GDP was about 54 trillion USD, but the financial and banking sectors stretched this amount to six hundred times. Thus the growth of entire global economy was brought to stand on the foundation of sands, which was bound to sink and implode.
Therefore, the World desperately needs huge liquidity and wealth in order to restructure,
revamp and rebuilt its global financial architecture. The American GDP is about 13-15 trillion dollar. According to economic experts, the USA is in desperate need of liquidity in order to ensure that the TARP and second stimulus package get going and help US economy recover from recession.
It is in this background the US administration is tightening its screws on the tax evaders. In a daring move, the US administration sought information from the United Bank of Switzerland (UBS) regarding the American clients who have evaded tax from the
Internal Revenue Service (IRS) and deposited their money in this clandestine off shore Bank. Initially, the UBS vehemently opposed this move and declined to disclose the names of clients and their amounts in the bank account on the pretext of its age old policy of secrecy and confidentiality conferred on it under
Swiss Banking Act,1934 The US administration toughened its stand and made UBS bow down. Now the Bank’s Chairman Peter Kurer says that “We accept full responsibility for these improper activities, he added, suggesting that client confidentiality, to which UBS remains committed, was never designed to protect ‘fraudulent acts’. Now the Bank is ready to disclose the names and the turnover of 250 clients immediately and assured the US administration to divulge some more names in near future. The Bank is also ready to pay 780 million dollar as penalty to avoid possible launching of prosecution against it.
This whole success story on part of US administration has set a good example for countries like India, the citizens of which have reportedly deposited 1456 billion dollar in UBS. According to the data of
Swiss Banking Association (SBA), in 2006, Indian nationals reportedly held the largest quantity of illegally stashed money in Swiss Bank, if this data is to be believed, and there is no reason of disbelief, Russians have deposited 460 billion dollar followed by British 390 billion dollar, Ukrainians 100 billion dollar and Chinese 96 billion dollars. These figures speak much than what it appears to be. This is why it is said that India is rich country where poor citizens live.
Ours is developing economy and we are proud of it. Even in this period of global meltdown, we have been making impressive growth, second to China only. But in terms of GDP, we are far behind than that of US, China, Japan etc. It is yet to cross 01 tn dollar at the current rate of convertibility. If the deposited huge amount of Indian Nationals is taken true, it is 1.8 times the GDP of our country. What a massive drain of wealth! Alas we could have brought it back. In fact this drain of wealth is much bigger than those of the British colonial period. Economic Historians have estimated that till Independence the Britishers had been able to drain our wealth from India equal to 5% of GDP, whereas; in post independence India it is 108% of the GDP. What a tragedy!
Like Americans, we too desperately require huge liquidity. We have injected massive stimulus package into the economy for a ‘jerk start’, for which we require more and more money. The
Indian Infrastructural Finance Company Limited (IIFCL), which provides fund to carry out infrastructural projects require money. The ambitious programne of
National Rural Employement Guarantee Schemes (NREGS, which has helped our rural economy become stronger and helped increase the purchasing power of billions of people in India requires more and more money so that it can yeild much more better results. Thus, to see economy moving and rural developmental schemes get going, we require money. The million dollar question is, from where will the money come? We cannot increase the tax rate, because it is counterproductive. We have already planned to launch GST from April, the next fiscal which is expected to add 1.4% additional increase to the GDP. We have to have tax regime which provide relief to the honest tax payers.
We have, therefore, to take recourse to similar measures as Americans have taken. If we can notch hefty amounts from the UBS, it can be of immense help for our ailing economy;
after all 1456 billion is an amount which can change the fate our nation. Some economists are of the opinion that the liberalisation has increased the pace of flight of capital and the size of drain of wealth kept growing with growth of economy. Time and again this issue has been raised but every time the power brokers have succeeded in thwarting the move. No serious effort has so far been made to see that the drained wealth of nation is brought back. There must be a political audacity to raise this issue and make meaningful effort in this regard. India must stand tall and extract information from UBS and other such offshore Banks with regard to clandestine bank deposits by Indian Nationals. We must talk to them in a peremptory tone and demand back the illegally drained wealth of the Nation. It is high time; India must stand firm with a determined body language so that UBS behaves with us at par with US.
This issue can be raised on world forums including G-20 or G-7 summits. How can a Nation or a financial institution like UBS be allowed to eat up the vitals of ours in the name of century old obsolete and colonial legislation? Time has come for the international community also to exert pressure on Switzerland and see that the policy of secrecy and confidentiality of UBS and other such offshore Banks be scrapped. It does not go against the Laissez-Fairre or free market economy, after all unethical financial practises and bottom less greed have already done tremendous damage to the world financial order beyond repair. Economies are made for the welfare of citizens in particular and human kind in general. How can unethical trade and financial practises be allowed to swallow the destiny and right to live a descent life of billions of poor people who still starve, while the Banks are spilling over with money and gold?
ASSETS OF UBS AND OTHER SWISS BANKS- It is astonishing to know that the total assets of UBS, the largest of the Swiss Banks, is roughly 2 trillion dollar which four times the GDP of Switzerland and 9 times that of Iceland. If assets of all Banks in this country are taken into account, it is 6-7 times the GDP of Switzerland. Comparing with countries like America and Britain, the assets of all the Commercial Banks in these countries are hardly 70% the GDP of these countries.
THE EDIFICE IS CRUMBLING- The sources in the Banks reveal that the outflow of money from these Banks are increasing. The UBS has made certain changes in the top management also. Peter Kurer is reported not to contest the forth coming election for the top job, the Chairman, this year. It seems that the old edifice is crumbling and days are not far when the entire principle of 'privacy'or ' secrecy' on which these Banks are standing would be put to question.
