Commerzbank, Germany’s second-largest bank, recently warned thousands of brokerage customers with ties to the US that their accounts could be closed by year-end because of steep reporting requirements related to a US disclosure law known as FATCA. Letters went out to the customers after a regular review on "risks and complexities."
“We first just want to clarify if the link to the US still exists and then we want to look for an individual solution for each customer,” a Commerzbank spokesman said. Some customers may be converted to an asset management account while others may just need to update their information. However, others may have their brokerage accounts closed.
The potential cancellations are just the latest financial regulation headache for Americans living abroad or doing business in Germany. The US is one of just a handful of countries that require its citizens living abroad to file annual tax returns, regardless of whether taxes are owed or not. Citizens are also required to annually report any assets above $10,000 held abroad, even if they already report and pay any taxes on income created by the assets.
The US ratcheted up its scrutiny of American expatriates in 2010 by passing the Foreign Account Tax Compliance Act, or FATCA. Since mid-2014, a treaty related to the act has required German lenders to tell US authorities any time they have a customer linked to the US. The oversight includes not only US citizens, but also green-card holders who also have a foreign bank account.
Because of FATCA, Deutsche Bank stopped offering US-based customers brokerage accounts in 2011, the Frankfurter Allgemeine Zeitung reported Tuesday. The FAZ was the first to report on Commerzbank getting in touch with its US-linked customers. The letters went out to several thousand customers, a source said.
Bankhaus Metzler, a Frankfurt bank that focuses on wealthy clients, reportedly no longer allows America-related customers to buy its funds or funds on its trading platform, though it still allows wealthy clients to maintain brokerage accounts. “We have many customers who were either born in the US or have a green card and are subject to this elaborate rule,” a Metzler spokesman told FAZ.
Commerzbank said the timing of the cancellations resulted from regular internal reviews. Still, starting in July, the US is further increasing the reporting requirements – by then banks must have performed a self-certification to ensure they are properly withholding and transferring tax to the US on certain assets, according to the FAZ.
Andrew Bulkeley is an editor in Berlin for Handelsblatt Global. To contact the author: [email protected]