Swiss Bank Julius Baer Contests Multi-Million-Franc Claim

Julius Baer earns good money with its trading business. But trading sometimes is associated with risks and a lawsuit currently shows just how risky the business really is.

Julius Baer, the Zurich-based private bank, in 2015 was burdened with a string of lawsuits, according to its annual report published yesterday. It put aside 571.9 million francs last year as cover for legal risks, up from 89.5 million a year earlier.

Of course the lion's share of the reserves was due to the fine it expected in connection with the tax dispute with the U.S. But the bank was also the subject of a number of complaints from customers – with one particularly notable example.

Forex Losses

One claimant in October 2015 in a partial claim demanded 1 million francs plus interest to cover for losses incurred in forex trading. The plaintiff accuses Julius Baer of violating its due diligence and information duties, leading to his losses amounting to 441 million francs.

Due to the size of the damage incurred, the plaintiff reserves his right to substantially increase the damages claimed, with a potential maximum of 121 million, according to the annual report.

Contested Claim

Julius Baer contests the claim and has taken measures to defend its interests, the bank said. Confronted by with a request for more information about the case, Julius Baer wouldn't be drawn to further comment the claim. Sources said that the bank is pretty relaxed about the potential risks emanating from the claim.

Of course, the potential leverage of the case may yet prove to be damaging to the company and sheds light on the risks involved in the trading business.

Trading income is a reliable generator of profit for the bank. The bank last year recorded an increase of 33 percent, thanks to the high volumes in forex trading following the central bank's decision to do away with the franc's peg to the euro. Together with the dividend income, trading income increased by 44 percent to 575 million, Julius Baer reported in February.


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