28 Provisions and contingent liabilities

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in CHF thousands

Provisions for legal and litigation risks

Provisions for re­struc­turing

Total 2014

Total 2013

As at 1 January

35'329

2'621

37'950

22'046

Reclassification of non-current assets
held for sale

0

0

0

3'000

Provisions applied

−4'918

−1'671

−6'589

−12'789

Increase in provisions recognised in the income statement

2'240

678

2'918

25'693

Release of provisions recognised in the income statement

−949

0

−949

0

As at 31 December

31'702

1'628

33'330

37'950

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in CHF thousands

31.12.2014

31.12.2013

+/– %

Short-term provisions

14'702

16'750

−12.2

Long-term provisions

17'000

21'200

−19.8

Total

31'702

37'950

−16.5

The provisions for restructuring relate to the Focus2015 strategy announced by the LLB Group in March 2013. As per 31 December 2014, provisions amounting to CHF 1.6 million for restructuring, covering estimated rebuilding and restoration costs, and expenses for social plans, were allocated. No further significant provisions or restructuring costs are to be expected in connection with the Focus2015 strategy.

Within the scope of its normal business operations, the LLB Group is involved in various legal proceedings. It sets aside provisions for ongoing and threatened proceedings when, in the opinion of the competent specialists, payments or losses on the part of Group companies are likely, and the amounts can be estimated.

As per 31 December 2014, the LLB Group was involved in various litigation and proceedings, which could have an impact on its financial reporting. The LLB Group endeavours to disclose the claims for damages, the scope of legal proceedings and other relevant information in order for the reader to be able to estimate the possible risk for the LLB Group.

In 2011, LLB Verwaltung (Switzerland) AG, formerly Liechtensteinische Landesbank (Switzerland) Ltd., was informed by the Swiss authorities that an investigation was being conducted against it by the US authorities in connection with cross-border private banking services for US clients. LLB Verwaltung (Switzerland) AG, the successor company with its registered office in Zurich-Erlenbach, is responsible for further procedure. LLB (Switzerland) Ltd. ceased its banking operations at the end of 2013, is since October 2014 no longer subervised by the Swiss Federal Financial Market Authority (FINMA). LLB Verwaltung (Switzerland) AG is cooperating closely with the US authorities and is working with them to achieve an efficient settlement of the issues while complying with the prevailing legal regulations. On 29 August 2013, Switzerland and the USA signed a joint statement in Washington to resolve the taxation dispute. The solution enables the banks to resolve past issues within a clearly defined framework. The US programme is open to all Swiss banks, excluding those banks which are the subject of criminal investigations by the US Department of Justice (so-called category 1 banks). LLB Verwaltung (Switzerland) AG belongs to the category 1 banks. These banks must seek a solution individually with the US authorities. As per 31 December 2012, in cooperation with our lawyers, on the basis of talks with the US authorities, and taking into consideration differing probabilities, various scenarios were discussed in relation to a possible outflow of resources. On the basis of these discussions, management reached the conclusion that it is not unlikely that an outflow of resources will occur. Therefore based on the simulated scenarios and a legal analysis as per 31 December 2012, a provision was set aside for a possible outflow of resources in connection with the investigation being carried out by the US authorities, and the resulting possible payment or settlement to the latter. In the opinion of management the legal risk of an outflow of resources in connection with the possibility that LLB Verwaltung (Switzerland) AG may not have complied with US law, especially US tax law, was still not unlikely as per 31 December 2014. Based on the calculation criteria applied in the non-prosecution agreement between LLB AG, Vaduz, and the US authorities, as well as the latest information and payments made by other banks, the provision for LLB Verwaltung (Switzerland) AG was reviewed as per 31 December 2014. Management believes the provision set aside per 31 December 2014 is sufficient.

The subsidiary company swisspartners Investment Network AG, the US Department of Justice (DOJ) and the District Attorney for the Southern District of New York announced on 9 May 2014 that they had signed a non-prosecution agreement. This agreement ended the investigations of swisspartners Investment Network AG and meant that no further legal action was initiated against the company. Thanks to the solution achieved, swisspartners Investment Network AG was able to definitely resolve the US taxation dispute. The US authorities investigated whether clients of swisspartners Investment Network AG had violated US tax law and securities regulations, and whether or in what form the company had been involved. Within the scope of the agreement reached, swisspartners Investment Network AG undertook to make a payment of USD 4.4 million. Sufficient provisions to cover the payment had been allocated in 2013. The specific provisions not applied for a possible payment were written back in favour of the income statement. An amount remains set aside to cover legal advice and support in connection with the conclusion of the non-prosecution agreement. Management believes that the provisions set aside per 31 December 2014 are sufficient.

Switzerland and the USA signed a joint statement in Washington on 29 August 2012 to resolve the taxation dispute. With the launch of their DOJ Programme 2013, the US authorities enabled the banks to participate in the programme and to regulate possible violations of US tax law directly with the US authorities. The US tax programme is an expression of the Swiss and US authorities to achieve a binding resolution of the taxations dispute. The programme envisaged that banks in Switzerland had to decide by the end of December 2013 whether and how they wished to participate in this taxation programme. In accordance with the principle of prudence, and in line with the statements made by the FINMA that an institution which decides in favour of category 2 is acting responsibly, the management of Bank Linth decided to participate in the programme in category 2, and expects from this step a final settlement of the issue. Based on the calculations specified by the DOJ, management made an estimate of the possible payment and allocated an appropriate provision. Management has no new information available, which would necessitate an adjustment of the provision and it believes that the provisions set aside per 31 December 2014 are sufficient.

Based on the available information, the LLB Group allocated provisions in the past and in the 2014 financial statement for the US taxation dispute. The proportion of these provisions, which was set aside for swisspartners Investment Network AG, was released with the payment of USD 4.4 million for the final settlement of the US tax dispute. A provision amounting to CHF 21.2 million was allocated for the LLB Group per 31 December 2014 for a possible outflow of resources in connection with a payment to the US authorities, as well as for lawyers’ fees, which may be incurred in this case for the provision of legal advice and support.

As per 31 December 2014, the LLB Group had no contingent liabilities.

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