Switzerland’s court of arbitration has ruled that Vontobel remains the competency centre for Raiffeisen’s investment banking until mid-2017 and clarified the role of the product and asset management units of Notenstein Privatbank, a subsidiary of the Raiffeisen Group.
Swiss structured products provider Vontobel and Raiffeisen ended a cooperation agreement in June last year through which Vontobel provided back-office functions to Raiffeisen and the Austrian bank distributed Vontobel’s structured investment solutions.
The scope of the partnership, which had been in place since 2004 and was extended until 2017 in 2009, gave Raiffeisen access to products and services from Vontobel while the Swiss bank was responsible for conducting securities processing and management for Raiffeisen.
Following the court decision, Notenstein and its subsidiaries are prohibited from providing the products and services that fall within the scope of the cooperation agreement to Raiffeisen clients. “This decision by the court of arbitration confirms Vontobel’s position with regard to this key question,” said a Vontobel spokesperson, referring to a statement issued by the bank.
According to Vontobel, Raiffeisen and Notenstein Privatbank had engaged in activities that partly conflicted with the existing cooperation agreement with Vontobel. “After several failed attempts at mediation and with the legitimate demand that the existing agreements should be upheld, Vontobel initiated arbitration proceedings – a course of action proscribed by both parties in the cooperation agreement – in November 2012,” stated Vontobel. “The primary objective of these proceedings was to restore contractual and legal certainty until at least mid-2017 and to safeguard the interests of shareholders.”
As a result of the court ruling, Vontobel will continue to provide the same products and services to Raiffeisen as before. A Notenstein spokesperson said that Notenstein Private Bank will assess the court decision and its reasoning together with Raiffeisen in the coming days. “The arbitral award will have no direct influence on the daily business operations of Notenstein and the bank remains entitled to continue its business activities with its own clients without any restrictions,” said the spokesperson from Notenstein. “However, certain restrictions apply to sales to Raiffeisen customers. The diversification strategy that has been embarked on with Notenstein and Leonteq will continue to be developed as before.”
Leonteq, the Zurich-based independent technology and service provider for investment solutions, which was not a party to the arbitration proceedings, expanded its partnership in the structured investment products segment with Notenstein Private Bank last July with the formation of a subsidiary of Notenstein Private Bank in Guernsey.
Leonteq reacted to the arbitration decision by stating that the court decision relating to proceedings released this morning between Vontobel and Raiffeisen Switzerland had no material impact on Leonteq. “After the announcement of the key elements of the arbitration decision relating to proceedings between Vontobel and Raiffeisen Switzerland, Leonteq takes note that the issuance of structured investment products by Notenstein Private Bank – a subsidiary of Raiffeisen – can be further pursued on the Leonteq platform,” said Leonteq. “The distribution of these products outside of the Raiffeisen channel is similarly unaffected by the decision.”
Leonteq also said that the decision only applies to the distribution of structured investment products by Notenstein Private Bank to Raiffeisen banks which is subject to a restriction until the cooperation agreement between Vontobel and Raiffeisen expires in June 2017. “This business represented less than approximately 1% of Leonteq’s total operating income in 2014,” stated a release from Leonteq.
“The distribution of Leonteq structured investment products to Raiffeisen banks, as well as the distribution of Notenstein products to its own Notenstein clients are not affected by the decision,” stated the release. “Leonteq appreciates that clarity has been established on this matter.”
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