Fifa’s US$2b loan deals to Swiss capital gets pushback

OFFICIALS in Switzerland are pushing back against borrowing from Fifa, after the football governing body’s loans – totalling 1.8 billion Swiss francs (US$2.6 billion) to the capital Bern – drew criticism.

Councillors in Bern tabled a motion on Thursday (Jan 26) 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 is comfortable “when it finances its expenses with money from a source like Fifa, that has been repeatedly confronted with corruption allegations”, said Milena Daphinoff, one of two municipal councillors pushing for an overhaul of Bern’s borrowing rules. 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 is 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 spokesperson saying that Swiss towns and cities are good counter-parties 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 fulfil 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, the organisation decided to ramp up its lending to Swiss local authorities, with loans increasing from US$2 million in 2016 before jumping to US$447.2 million a year later, then about 42 per cent of its investment portfolio, as indicated by its annual report.

Fifa’s culture has changed, the spokesperson said, referencing the US Department of Justice’s decision in 2021 to grant US$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”, which will be “returned to where it belongs, and used to benefit the sport”.

Fifa is coming off a banner year in which the 2022 World Cup generated an extra US$1 billion windfall in revenue. Its spokesperson said that all the loans are made through an independent asset manager at competitive rates through online platforms that match borrowers and lenders.  

SEE ALSO

A spectacular year for world sport

Fifa to introduce cap on fees in widespread agent rule changes

Though Fifa declined to say what kind of returns these loans generate, it is unlikely that they made significant returns. Most Swiss government entities borrowed at negative rates until last year, meaning that lenders like Fifa paid them for privilege of lending.

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 re-election unopposed this year, described the recent Qatar World Cup as the best edition yet of the quadrennial competition. The tournament finished 2022 with revenue of US$7.5 billion, a billion more than expected.

The returns that Fifa makes from the proceeds of tournament broadcasting rights and other sponsorship deals are then invested into developing football facilities and programs. The organisation said that over the last four-year cycle, US$5.3 billion was directly invested in football. 

At the end of 2021 – the latest period for which data is available – Fifa had US$514 million in third-party loans outstanding, out of a total of about US$3.4 billion in financial assets, and a further US$800 million in cash and cash equivalents. BLOOMBERG