Swiss Watchdog Steps Up Action Against Julius Baer on Benko
(Bloomberg) — Swiss financial regulator Finma said it had opened an enforcement procedure against Julius Baer Group Ltd., stepping up action against the bank over risk failures linked to the collapse of the Signa real estate empire.
An enforcement procedure is a formal step that can lead to measures including a reprimand, confiscation of profits or a removal of banking licenses. Finma doesn’t have the power to fine banks.
A spokesman for the regulator said by email that it had taken the decision after “lengthy and rigorous investigations.”
The action casts a shadow over new Chief Executive Officer Stefan Bollinger’s first weeks in charge of the Swiss wealth manager, and calls into question the bank’s ability to carry out a share buyback this year as hoped. The matter relates to practices that allowed Julius Baer to run up a $700 million exposure to the Rene Benko’s Signa property conglomerate, which is now bankrupt.
Julius Baer shares fell sharply on Monday following the release of full-year 2024 results, down as much as 13.7%.
“Share buybacks may be off the table in 2025,” analysts at KBW wrote in a note earlier Monday, adding that they saw the possibility of a much larger program in 2026 “regardless of the outcome of the Finma review.”
Earlier Monday Bollinger announced that the executive board is being cut to five members from 15, and the bank will seek an additional 110 million Swiss francs ($120 million) in annual cost savings.
That will translate to about 400 jobs in Switzerland, equivalent to about 5% of the workforce.
Finma’s investigation, which began before Benko’s real estate firms began to unravel in 2023, was prompted by concerns that Baer’s business and control functions weren’t sufficiently separate. Following steep losses on loans to Signa firms, the bank said it was shutting the private debt business responsible, and has since fired the then-CEO Philipp Rickenbacher.
The bank’s executives had linked their ability to pay out capital to investors via a buyback program to the conclusion of Finma’s investigation. The announcement of the opening of proceedings is a setback as it puts those plans subject to the ongoing regulatory process.
Julius Baer said it would give a strategy update before the summer as well as updated financial targets.
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