New markets in the Middle East and Southeast Asia have made the business activities of Liechtenstein financial intermediaries even more international. The Liechtenstein financial center again experienced strong growth in the 2007 business year. The FMA is convinced that while the reputation of the financial center may have suffered from the German tax affair, no damage has been done by the subprime crisis.

"Despite the subprime and banking crisis as well as turbulent financial markets, the 2007 business year of Liechtenstein financial service providers was successfully concluded with above-average increases in growth and earnings." Mario Gassner, acting CEO of the General Management of the Liechtenstein Financial Market Authority (FMA), gave this assessment during the presentation of the FMA's 2007 Annual Report. By the end of 2007, 2,089 financial market participants domiciled in Liechtenstein were subject to FMA supervision: banks, investment undertakings, asset management companies, and pension schemes. In comparison with the previous year, this represents an increase of 10%.

The assets under management of all financial market participants increased in the 2007 business year from CHF 228.9 billion to CHF 277.7 billion. This represents an increase of 21.3%. The 16 banks licensed in Liechtenstein managed client assets in the amount of CHF 201.3 (173.4) billion, corresponding to an increase of 16.1%. Investment undertakings grew by 14.2% to CHF 30.5 (26.6) billion. Asset management companies recorded growth of 92.1% to CHF 21.5 (11.2) billion. With an increase of 43.9%, insurance companies also achieved a surge in growth to CHF 21.3 (14.8) billion. Pension schemes grew by a more modest 6.9% to CHF 3.1 (2.9) billion.

The responsibilities of the FMA as an independent and integrated supervisory authority include guaranteeing the stability of the financial center. The FMA is not a central bank, but according to Mario Gassner the FMA must ensure that negative occurrences among individual financial intermediaries do not have an effect on the financial center as a whole. This means that the FMA must recognize developments and therefore potential risks to the financial center early on and act accordingly. For this reason, the FMA has established ties with the Swiss National Bank and intends to deepen this dialogue further. The responsibilities of the FMA also include ensuring compliance with recognized international standards.

At its presentation of the 2007 Annual Report, the FMA also addressed the current developments concerning the German tax affair, which was triggered by the theft of client data from a Liechtenstein trust company. On its own role in this regard, the FMA stated: "For the FMA, the primary concerns were data security and the protection of client data, as well as the impact on the financial center as a whole. Over the last few months, the FMA has been under considerable pressure in dealing with these events, in addition to its daily business. Despite these turbulent times, it immediately took the necessary supervisory measures in a calm but decisive manner and sent clear signals to those involved. Because of official secrecy, the FMA is unable to give detailed information on the cases in question."

The FMA believes that the reputation of Liechtenstein and its financial center have been damaged by the events. At the same time, however, the FMA notes that cooperation among financial center actors functioned smoothly during the crisis. The financial center system remained stable, but the country cannot afford to sit back now and take things easy. The initiated reforms of the financial center must be implemented rapidly.

According to the FMA, the subprime crisis has not entailed any direct risks for Liechtenstein banks, since no investments in the affected securities were made. When the problems on the US real estate market and the resulting subprime and banking crisis became apparent, the FMA immediately obtained a picture of any relevant risks from the banks, insurers, and pension schemes. Some life insurers had invested directly in US mortgage-based products, but the amounts were modest, and the products only affected life insurance policyholders bearing their own risk. The FMA confirms, "The subprime crisis and the resulting banking crisis therefore has no major impact on the Liechtenstein financial center." However, the impact will be felt due to the resulting financial crisis, which has adversely affected the stock markets.

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