June 19, 2013 / 7:47 AM / in 5 years

Swiss upper house keeps U.S. tax deal alive; set for lower house

ZURICH (Reuters) - Swiss upper house lawmakers kept alive a draft law aimed at ending a long-running U.S. tax probe into hidden offshore accounts at Swiss banks on Wednesday, leaving the final say with the lower house, which has previously rejected it.

Lawmakers are deeply divided on a bill aimed at allowing banks to sidestep strict Swiss secrecy laws by disclosing their U.S. dealings to prosecutors, helping them to strike deals that are nevertheless expected to include fines that could cost the industry as much as $10 billion.

The Swiss government has warned that the bill’s failure is likely to lead to criminal charges against Swiss banks by impatient U.S. prosecutors.

With the draft law increasingly unlikely to be fast-tracked before the end of parliament’s summer session on Friday, government officials and lawmakers scrambled to mitigate the potential fallout for Swiss banks.

Upper house lawmakers issued a statement acknowledging the situation’s urgency and saying they were in favor of Swiss banks making amends for wrongdoing, a move they said they hoped would appease U.S. officials.

The protection of client information has helped to make Switzerland the world’s biggest offshore financial center, with $2 trillion in assets. But the haven has come under fire as other countries have sought to plug budget deficits by clamping down on tax evasion, with authorities probing Swiss banks in Germany and France as well as the United States.

U.S. authorities have more than a dozen banks under formal investigation, including Credit Suisse CSGN.VX, Julius Baer BAER.VX, the Swiss arm of Britain’s HSBC (HSBA.L), privately held Pictet in Geneva and local government-backed Zuercher Kantonalbank and Basler Kantonalbank (BSKP.S).

    An indictment felled Wegelin & Co this year. The bank paid a $58 million fine and closed its doors for good after pleading guilty to helping wealthy Americans evade taxes through secret accounts.

    Lower house lawmakers are set to take up debate again later on Wednesday.

    If the bill dies in parliament, the Swiss government could still take matters into its own hands and approve the data transfer with an executive order, though circumventing a hostile parliament is seen as a gamble.

    Switzerland’s biggest bank, UBS UBSN.VX, was forced in 2009 to pay a fine of $780 million and deliver the names of more than 4,000 clients to avoid indictment, giving the U.S. authorities information that allowed them to pursue other banks.

    Reporting By Katharina Bart; Editing by Will Waterman

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