Steven Scheer writes:   Israel arrested 14 people, including a senior UBS investment adviser, as part of an investigation into Israelis allegedly holding undisclosed bank accounts with UBS worth hundreds of millions of euros, the Tax Authority said on Wednesday.  All 14 had been released on bail soon after their arrests.
In addition to the unnamed senior investment adviser at UBS who was arrested in June in Tel Aviv, 12 Israelis with accounts at UBS had also been arrested, including two suspects who own a chain of health clinics abroad, said the tax authority. An accountant for the clinics was also arrested.  An Israeli court allowed publication of the arrests and allegations following a petition by an Israeli newspaper. The court is considering whether to release the names of those arrested.
Israel is starting to crack down on foreign bank accounts held by its citizens after a similar move by the United States to track accounts held by Americans abroad.  The tax authority said it had carried out a long investigation into accounts held by Israelis in Swiss banks and received information that thousands of Israelis maintain accounts in Switzerland, worth hundreds of millions of euros.

The authority said that the UBS adviser had arrived in Israel the day before he was arrested. He had met Israeli clients at a luxury hotel in Tel Aviv the following day.
“The meetings were held under secret surveillance of tax authority investigators,” it said. “At the end of the meeting …all the participants were arrested.”
Searches were subsequently made in the hotel room of the UBS adviser, UBS’s office in Israel and in other locations.  Among the adviser’s possessions, investigators found lists of hundreds of Israelis with unreported bank accounts in Switzerland, the authority said, adding that he is accused of helping clients intentionally and deliberately avoid reporting and paying taxes.
It said the adviser — directly responsible for dealing with the accounts — would visit Israel for secret meetings with clients who did not want to send instructions and documents to the bank by phone, mail or fax to avoid revealing that they held Swiss bank accounts.
Leumi, Israel’s second largest bank, last week said a settlement with U.S. authorities over possible tax evasion by the bank’s American clients could be far higher than previously estimated.
The total penalty could reach as much as $600 million, based on Leumi’s previous estimate as well as a settlement offer from New York State’s financial regulator.

David Shilpley writes:  The European Central Bank has just published the results of new “stress tests” on European Union banks, hoping to convince financial markets that the banking system is now strong enough to weather another crisis. This latest exercise is a big improvement over previous efforts, which were widely derided as too soft — but it’s still not good enough.

The test was in two parts.  One found that most of the over 130 banks had overvalued their assets.  The second part assessed whether the correct value of the assets kept the banks in a safety zone.  25 failed the test.  8 needed to raise 6.4 billion dollars.

Deutsche Bank raised 8.5 billion in equity this year to help them pass the stress test. Weak institutions, such as Portugal’s Banco Espirito Santo and Austria’s Volksbanken network, are restructuring or shutting down. By strengthening the system and increasing confidence in it, the ECB’s tests might reverse a two-year slump in private-sector lending.

The tests are pretty soft. Economists at Switzerland’s Center for Risk Management at Lausanne put the capital shortfall at 500 billion euros, not the 6.8 billiioin put forward by the ECB.  Of course, the ECB takes over as the euro areas’s supernational bank supervisor on November 4.  If it had been too tough it might have blown the euro back into crisis.

Economists like Anat Admati would rather have the percentage of equity determine a bank’s ability to withstand stress.

How DId the Bank Pass the Stress Test with So LIttle Cash?