Swiss banking heavyweight put ‘under monitoring’ by sustainability ratings agency

Independent sustainability ratings agency Standard Ethics has announced that Julius Baer is “under monitoring” following “a number of controversial events” at the Swiss banking group, whose governance failures on money laundering risks in recent years have been widely publicised.

The London-based agency footnotes a story by Reuters from earlier this year which reported that the Swiss group had been reprimanded by its country’s financial regulator for ignoring money laundering risks in handling payments linked to corruption in Venezuela and football’s governing body FIFA.

Julius Baer’s chairman Romeo Lacher said at the time: “We accept FINMA’s findings and regret the shortcomings identified in our business with Latin American clients.”

Last month, the FT reported that Julius Baer was in “advanced discussions” with the US Department of Justice to resolve the allegations linked to FIFA.

A spokesperson for Standard Ethics told RI that “typically” companies are put under monitoring when there are “ongoing controversial cases, the outcome of which could impact the current rating”. 

Standard Ethics rates Julius Baer as “EE-” or “adequate” – the last rung on its scale deemed “investment grade”. All controversies over a five-year timespan are considered before deciding to place a company under monitoring or take a rating action. 

Its spokesperson said that there had been more than one controversial case at Julius Baer, but that it only cited the money laundering lapses in its notice as they are the “most relevant” and the ones “where the company's response is deemed to be more important”. 

In its notice, Standard Ethics acknowledged that Julius Baer’s “top management” is a “model of governance in line with international good practice, supported by ESG reporting to the best standards”. But added that in light of controversies, it has decided to keep closer watch on the group’s “risk management and strategic governance of sustainability”. 

It called on Julius Baer, which is Switzerland’s third largest listed bank, to adopt “key international references” in its Code of Ethics and Business Conduct, such as Universal Declaration of Human Rights, UN Guiding Principles on Business and Human Rights, OECD Guidelines for Multinational Enterprises, and the European Green Deal.

A spokesperson for Julius Baer Group told RI that it had “taken note of the  recent announcement by Standard Ethics”. 

“Julius Baer has invested substantially over the past few years in strengthening our compliance and risk management processes to make them fit for the challenges of the future and, as part of our new strategy, we will continue to invest forcefully in these areas,” she said.  “We are fully confident that the measures we have taken have already had a positive lasting impact.”