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Services
Overview of Banking and Our Services
The following is a definition of Banks in the Swiss Context which allows us to clarify the general context of our services:
Bank
A corporation or firm operating in the financial sector, which accepts deposits from the general public in the course of its business or advertises for such deposits in order to finance an indetermiant number of persons or entities that are outside the bank's overall economic framework: an entity that refinances its operations through other banks that do not hold shares in its capital: an entity that buys/sells or deals on commission in securities by offering them to the public.
PIA Bank S.A. is a corporation which advertises for deposits in order to finance an indeterminate number of entities (banks and other corporations) that are both inside and outside the bank's overall economic framework: it is an entity that refinances its operations through other banks that do hold shares in its capital as fiduciary accounts: it is also an entity that creates securities by securitizing assets and deals on commission in such securities by offering them to other banks.
In particular, the following distinctions exist:
-- national, regional, state and urban banks whose liabilities are guaranteed by their government of origin;
-- big banks whose business is both domestic and international;
-- regional banks and saving institutions;
-- commercial or universal banks, that offer services relating to commercial transactions, mortgages and asset management;
-- banks specialising in securities transactions;
-- banks owned by foreign investors and/or their subsidiaries in Switzerland; private bankers who, in the course of their business, assume unlimited liability on their personal assets.
PIA Bank S.A. has the following distinctions:
-- a universal bank that offers services relating to commercial transactions and asset management;
-- a bank specialising in securities transactions
-- private bankers who, in the course of their business, assume unlimited liability on their personal assets
-- banking secrecy is respected as the discretion that a bank maitains regarding the economic and personal affairs of its clients revealed to the course of its business. Please see the bank's position on corruption and sanctions.
-- PIA Bank's income is basically commission income which can be described as follows:
-- income from banking activities, generally stated off-balance-sheet
-- investments relating to currencies securities and derivative instruments on the behalf of clients, for which service the bank charges a commission. We do not provide advice nor audits outside the context of an arbitrage or securitisation of asset-based securities or other asset management.
-- PIA Bank's deposits are of a mixed ficuiary nature. The fiduciary portion of a client's net assets administered in the name of the asset manager, but at the owner's risk and behalf. The risk management in the fiduciary accounts is low as they are mainly for the purchase of energy and pure water bonds as collateral from Chronotechnics Holding whose products are energy and pure water.
-- PIABank's clients are institutional clients. Institutional clients are legal entities (companies, banks and various entities) that entrust the financial assets they control to asset managers.
The terminology in the passage above was in part derived from Niklaus BLATTNER, Benedickt GRATZL, and Tilo KAUFMANN "Asset management by Banks in Switzerland," (adapted by Paul Coudret) LIU Basle, 1996.
Central, Corporate and Asset-Based Security Banks
What is Securitisation?
"Securitization" is the transformation of assets such as loans and leases into securities that can be traded in a secondary market; commercial banks increasingly are using securitization as a tool for managing their balance sheets. Though the government subsidized mortgage securitization market has flourished for decades, banks have more recently begun to securitize other asset types. A primary advantage of securitization to banks is improved liquidity.
PIA Bank S.A. is principally involved in the securitization of new categories of assets where new types of securities must be created under the direction and guidance of global trade organizations like OECD, WTO, and the Bank of International Settlements. How does this work and why is PIA Bank S.A. involved?
There are two aspects to this type of securitization: the treasury and corporate bonds, notes and related swaps and the issuing of new securities for the guaranteed sale of pure water or energy which stabilize prices over a long period of time, thus guaranteeing stable economic growth.
The first instance of securitizations presents a standard scenario for treasury bills leading into two arbitrage banking scenarios. The first scenario is the creation and negotiation of new securities with the best terms for both parties in the case of defaults such as occurred in Argentina implicating many international lenders or bank failures. In another section we will discuss the Federal Reserve Bank's concerns as expressed in their Larg report.
In the corporate sector, the same scenario applies to corporations who find that as result of shifts in assets or errors that they contravene SEC standards and want to redistribute their assets in new securities to correct this situation. This would be somewhat the opposite of the Enron situation where the situation was concealed in subsidiaries whose only reason for existing was balancing the books by transferring the debt load to these non-functioning subsidiaries. This means that our services would be of interest to companies like G.E. and others who are experiencing audit problems in a rapidly changing market.
The second instance of securitization results from the fact that PIA Bank S.A. needs to develop securities for the sale of Chronotechnics Holding's water purification and electrical energy. The essence of these bonds is the provision of a set period and quantity of pure water or electrical energy as a bond which can be used as collateral like a treasury note or redeemed in times of shortage in order to set up a controlled economic environment. Thus, if spot prices on oil and gas rise, it is possible to redeem the electrical energy bond to supplement your needs and have an immediate and guaranteed supply of electrical power. Chronotechnics Holding S.A. is not a competitor with the petroleum suppliers but rather a secondary supplier whose product is marketed through mixed energy marketers, that is to say coporation which market gas and petroleum as well as electricity. Thus, the goal is to keep the supply stable.
Asset Management, Globally Registered Asset-Based Securities and Fiduciary Accounts
Assets to be securitized by a bank are bundled together into pools with similar assets. These pooled assets are then transferred to an entity separate from the bank, called a special-purpose entity, that issues asset-backed securities (ABSs) to investors.
An ABS represents an ownership interest in the pool. A servicer, often the bank that originated and sold the asset, is contracted by the special-purpose entity to collect payments on the loans or leases in the pool of assets, to transfer funds to the investors.
In the case of PIA Bank S.A., the assets are principally the assets of Chronotechnics Holding S.A. and PIA Bank's funds and financial programs which are offered to the depositers in the form of asset-based securities. The assets are much broader than the two major categories: energy and pure water. Each license represents potential assets such as pharmaceuticals, new chemicals and procedures, weatherization (climate control for a given region over a given period of time), wave based patents in communication and plasma related devices. The deposit can be allocated in any percentage to acquiring the asset-based securities by transferring a sufficient balance into the fiduciary account.
Jurisdiction of the CMF
The French Financial Markets Council (Conseil des Marchés Financiers, CMF) was created pursuant to the Financial Activities Modernization Act of 2 July 1996, which transposes into French law the EU directive on investment services of 10 May 1993. The CMF's jurisdiction in terms of regulation and supervision is not restricted solely to regulated markets; it covers the full gamut of financial activities, with the exception of asset management for third parties, which comes under the responsibility of the Commission des Opérations de Bourse (COB). It has a number of departments, which employ market professionals and which together form its General Secretariat. In terms of organization, the CMF is subject to private law.
The CMF has drawn up a set of General Regulations, which have been approved by the Ministry of the Economy and Finance after consultation with the Banque de France and the COB. The regulations apply to all investment service providers, irrespective of their legal status, as well as to market undertakings (i.e. exchanges) and clearing houses.
The CMF's remit covers the following areas:
Regulation and supervision of regulated markets and clearing houses
The CMF defines the general principles governing the organization and operation of regulated markets in financial instruments. It proposes to the Ministry of the Economy and Finance to recognize the status of regulated market. Further, it approves market undertakings' operating rules, having ascertained that they ensure regular trading, as well as the operating rules of the clearing houses. Finally, it monitors the regularity of transactions carried out on regulated markets.
Authorization of investment service providers
The CMF approves the program of operations of new credit institutions and investment firms before they can be authorized by the Comité des Etablissements de Crédit et des Entreprises d'Investissement (CECEI). The CECEI examines in particular an applicant's legal, financial and ownership structure. Together, the CMF and the CECEI issue the European Passport that allows French companies to offer investment services in other member states of the European Economic Area.
Definition and supervision of compliance with rules applicable to investment services providers
The CMF regulates the investment services provided by investment firms and credit institutions on regulated or non-regulated markets. In particular, the CMF's regulations cover rules of conduct, issuance of professional licenses to natural persons working in the markets, and the establishment of a guarantee fund to protect the clientele of an investment service provider against the possibility that the firm will default. The regulations also cover related services, notably the custody and administration of financial instruments.
The CMF has powers of supervision and sanction that enable it to enforce compliance with the rules for which it is responsible. These sanctions are exercised by specially formed disciplinary committees and are subject to appeal to the Conseil d'État.
Regulation and approval of tender offers
The CMF establishes the rules for public tender offers involving financial instruments traded on regulated markets as well as the conditions for mandatory offers, standing offers, public buyout offers and squeeze-out procedures. The Council oversees compliance with those rules and conditions.
Any public tender offer for a French company quoted on a regulated market in France is subject to the CMF's prior approval. Further, the CMF may examine offers for the securities of foreign companies quoted on a regulated market in France.
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The following financial scenarios are anticipated to impact on PIA Bank S.A.:
1. The refinancing of an affiliate of the parent company. A company has decided to set up a subsidiary in a member state of the EU in order to facilitate financing of the Group operating in the member state.
2. Strengthening an existing subsidiadiary. A company wants to increase its presence in a neighbouring by creating an autonomous structure for an existing presence. An investment house, a former titles broker, who has played a role now and in prior instance in another state's economic jurisdiction by offer services, now wishes to offer its services through a subsidiary while still preserving the possibility of similar services from the main office in Paris.
3. The creation of an initial introduction in the context of the expansion of the European Union linked to the passage to a single currency or with the intention of offering clients the possibility of direct trading on European markets or even as indicated above the expansion of an existing subsidiary.
4. A Request concomittant with a request for commercial status. There is a history of companies who made their declaration of commercial services concomittant with their request for a license as investment houses. In this case, the council evaluates the terms of each request, with the condition stated that the declaration of service will only be effective from the date of delivery of the license from the CECEL.
