Officials in Switzerland are pushing back against borrowing from FIFA after the football governing body’s loans, totaling 1.8 billion Swiss francs ($2 billion) to the capital Bern, drew criticism.
(Bloomberg) — Officials in Switzerland are pushing back against borrowing from FIFA after the football governing body’s loans, totaling 1.8 billion Swiss francs ($2 billion) to the capital Bern, drew criticism.
Councilors in Bern tabled a motion on Thursday that would require the city to draw up and apply governance rules on how — and from whom — it borrows, following reports detailing its loans from Zurich-based FIFA, including 35 financing deals since 2017.
The city must ask itself if it’s comfortable “when it finances its expenses with money from a source like FIFA that has been repeatedly confronted with corruption allegations,” Milena Daphinoff, one of two municipal councilors pushing for an overhaul of Bern’s borrowing rules, said in an interview.
The government is borrowing based on the cheapest offer “and that’s not acceptable in the 21st-century,” she said.
Bern said earlier this month that it’s examining whether ethical assessment criteria will be taken into account when borrowing money from FIFA, which has offered short-term financing and refinancing to Swiss municipalities since 2017.
The review was prompted by calls from Bern city councillors concerned that the government was borrowing from a body whose past corruption scandals culminated in police raids of its delegates’ hotels in Zurich in 2015.
For its part, FIFA justified the financial deals, with a spokesman saying in a statement that Swiss towns and cities are good counterparties in terms of risk and are part of its prudent money-market management strategy.
“The priority is to have low risk and short term investments to be able to fulfill our mandate which is to develop football around the world,” he said.
FIFA has long managed a loan portfolio, targeting short-term bonds predominantly in government or public debt.
In 2017, FIFA decided to ramp up its lending to Swiss local authorities, with loans increasing from $2 million in 2016 before jumping to $447.2 million a year later, then about 42% of its investment portfolio, according to its annual report.
FIFA’s culture has changed, the spokesman said, referencing the US Department of Justice’s decision in 2021 to grant $201 million to the sports body, a payment described by US authorities as “money stolen by corrupt soccer officials and sports marketing executives through fraud and greed will be returned to where it belongs and used to benefit the sport.”
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FIFA is coming off a banner year in which the 2022 World Cup generated an extra $1 billion windfall in revenue.
The FIFA spokesman said all the loans are made through an independent asset manager at competitive rates through online platforms that match borrowers and lenders.
Though FIFA declined to say what kind of returns these loans generate, it’s unlikely it made significant returns.
Most Swiss government entities borrowed at negative rates until last year, meaning lenders like FIFA paid them for privilege of lending.
A statement from Bern’s finance department said that since all financing from FIFA was at negative interest, the city received a total of around 3.1 million Swiss francs.
FIFA invests in football using revenues from managing the World Cup, broadcasting rights, and other sponsorship deals.
Over the past decades, the sport has become incredibly lucrative. FIFA President Gianni Infantino, who is seeking reelection unopposed this year, described the recent Qatar World Cup as the best edition yet of the quadrennial tournament, and finished 2022 with revenue of $7.5 billion, a billion more than expected.
The returns FIFA makes from the proceeds of tournament broadcasting rights and other sponsorship deals is then invested into developing football facilities and programs.
Over the last four-year cycle, it says $5.3 billion was directly invested in football.
At the end of 2021 — the latest available data — FIFA had $514 million in third-party loans outstanding, out of a total financial assets of about $3.4 billion and another further cash and cash equivalents of $800 million.
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