Swiss may gain from stress test transparency

ZURICH (Reuters) - Publishing details of stress tests on Swiss banks could help heavyweights UBS and Credit Suisse showcase their strength versus foreign peers, the head of Switzerland's banking lobby told Reuters.

Swiss Bankers Association Chairman Patrick Odier said in an interview UBS and Credit Suisse would most likely stand out against competitors in a stress test due to their superior capital and liquidity ratios.

"For the two big banks it may be more helpful than they think," Odier, a managing partner at Geneva's 200-year-old private bank Lombard Odier, said. "Their agreement with (regulators), whether on leverage or liquidity, is there, while in the rest of the world this is not even implemented.

"I think it would frankly work to their advantage."

Odier said financial regulator FINMA had regularly tested Swiss banks to check if they could withstand a severe shock.

However contrary to what is happening in the European Union, FINMA has not so far published details about which methodology it uses. It said earlier this month it may consider publishing the results of the tests for the country's two largest banks.

"Do we need more transparency here? I think if it comes to compare institutions, we would probably be well advised to have more transparency also on our stress tests in Switzerland, provided we compare apples with apples," said Odier.

"It would be wrong to compare a very international bank and a wealth manager with a local cantonal bank. We have to be careful about that," he added.

Switzerland is a not a member of the 27-nation EU and its banks therefore are not included in the banking tests, although FINMA has been in regular contact with its EU counterparts.

In October, FINMA published general results from regular stress tests to which banks in Switzerland are subject, saying both UBS and Credit Suisse could weather a severe deterioration in the economy.

Odier said Switzerland should be balanced in the information it gives out, but should also avoid giving others reasons to believe it was hiding something.

"It's clear that stress tests do call for a certain degree of transparency because otherwise the criticism toward methodology and criteria is too easy and unfortunately the debate may be shifted on those rather than results," he said.

TAX SOLUTION IN SIGHT?

Odier said Switzerland, whose biggest bank UBS came under attack by U.S. tax authorities last year, will not accept undeclared money from foreign clients in future, but needs to find a solution for the untaxed wealth still at its banks.

"The first pillar of our strategy is to make sure that the problematic (issue) with regards to the untaxed assets of the past is solved as fast as possible," Odier said.

"The idea is to provide a viable alternative to the automatic exchange of information, which we refuse."

That alternative would consist of a withholding tax negotiated with each individual country, which Switzerland is trying to negotiate with big neighbors such as Germany.

Odier said the tax would have an element of retroactivity, going back for instance as far as the statute of limitation of a particular country for tax evasion, as well as a penalty, making this offer palatable for countries like Germany and France that reject the idea of a tax amnesty to end the debate.

Switzerland would in exchange want to offer financial services across its borders, something the EU won't allow it to do unless it gives up its treasured privacy laws.

Germany has been pressuring Switzerland to give up its privacy laws. Berlin has acquired stolen data belonging to Credit Suisse clients and its tax officials searched the bank's offices in Germany on Wednesday.

(Editing by Michael Shields and David Holmes)