BTG Pactual Sweating Out BSI

As in the «Slovenly Peter» fable: «And at table Mother's glare / silently at all did stare.»

As in the «Slovenly Peter» fable: «And at table Mother's glare / silently at all did stare.»

The tumultuous ending of Ticino private bank BSI should be cause for alarm for its current owner, Sao Paulo-based BTG Pactual. That isn't quite the case, as sources told

In a surprise announcement yesterday, the more than 140-year-old Banco della Svizzera Italiana (BSI) was ordered by Finma to disappear from the market within 12 months following serious violations of money-laundering and fit and proper requirements. The crashing demise of the Swiss private bank was also noted in Brazil.

BSI’s parent BTG reacted in a initial step by replacing BSI Chief Executive Stefano Coduri with its own executive, Roberto Isolani. BTG was otherwise mum, though the situation begs many questions of the South American investment bank, which is a shadow of its former self after its billionaire founder was arrested as part of a graft probe into Petrobras.

Favorable for BSI

Interestingly, as BTG went about due diligence for its purchase of BSI in 2014, it doesn't seem to have been bothered by a reprimand against the Swiss private bank by regulator Finma. On Tuesday, the Swiss regulator said it has issued stern warnings as far back as 2013 against BSI for its how it dealt with money-laundering rules.

Inquiries by show that the Brazilian investment bank is far from alarmed by Swiss and Singaporean regulatory efforts, saying they are actually «good for BSI», since it clears up any lingering uncertainty linked to the 1MDB scandal for BTG.

Coduri Sacrificed

The swift departure of BSI boss Stefano Coduri is also seen in a favorable light.

It is now up to incoming BSI boss Isolani to reassure clients and staff alike that «there is no imminent reason for concern», one source said, since the era of weak controls and poor management oversight is definitely in the past. This message is all the more important since competitors are angling to use BSI’s current situation against it in order to win clients and money off the bank.

The Swiss attorney general’s probe appears to be less of a concern to BTG: there, general sentiment is that key issues have already been addressed by Finma.

Generali Stuck With Bill For BSI

More importantly, the sale of BSI from the Brazilian owner to Swiss private bank EFG is on track, with Finma’s public backing for the deal on Tuesday.

Financially, BTG Pactual sees its short ownership of BSI as «digestable», since its view is that Generali will inevitably have to cough up for operational mistakes. According to a purchase agreement, Generali must compensate for damages, though to be sure, Generali has in the past taken a different view on this.

Security Deposit to EFG

BTG Pactual isn’t escaping unscathed: Finma ordered a profit disgorgement of 95 million Swiss francs from BSI. And as EFG previously said, it insured itself against potential future damages by transferring 51 million EFG shares meant for BTG into escrow, where they are to remain as a security deposit for two years.

If that remains the case and in particular what of BSI is left over after the current blowout is yet to be seen.

BSI’s parent BTG Pactual can do little other than sit out the current situation and hope for the best. Or as put in the «Slovenly Peter» fable: «And at table Mother's glare / silently at all did stare.»



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