GENEVA (Reuters) - Switzerland has no choice but to bow to a U.S. ultimatum and sidestep its banking secrecy laws to end an investigation into how Swiss banks helped wealthy Americans evade taxes, ex-Deutsche Bank AG head Josef Ackermann said.
The Swiss parliament is divided over a government bill unveiled last week, which would let Swiss banks hand over internal information to the U.S. authorities in the hope of avoiding threatened criminal charges - though the banks still face fines likely to total billions of dollars.
While not an example of “respectful diplomacy” by the United States, which is effectively dictating the terms of the settlement, Switzerland should accept the offer, said Ackermann, who is chairman of Zurich Insurance.
“A sober assessment must conclude ... that there is indeed no alternative to accepting the U.S. offer,” he said at an event sponsored by Thomson Reuters in Geneva on Monday.
“It probably provides the last opportunity for solving a highly contested issue in a manner that conforms with Swiss law ... and our understanding of bank client privacy.”
Since returning to Switzerland from Germany last year, Ackermann has become a forceful advocate for the Swiss financial sector, a rare senior banker still in a position of power given the departure from the industry of other top figures during and since the financial crisis.
Switzerland’s tradition of banking secrecy has helped make it the world’s biggest offshore financial centre, with $2 trillion in assets. But its position has come under fire since the crisis, as cash-strapped governments clamp down on tax evasion, with authorities in Germany and France as well as the United States probing Swiss banks.
Bridling at the U.S. pressure, many Swiss lawmakers have pledged to vote down the deal, which the Swiss government is asking parliament to rush through, citing a U.S. threat of further criminal charges against more banks.
It insists banks will still not be allowed to hand over client names, but the new proposal, valid for a year, would allow them to hand over so much information that U.S. officials should be able to identify individuals involved.
Some banks not named in the investigation, along with lobbies for thousands of tax lawyers, custodians and small asset managers, have also expressed outrage, fearing a deal that ignores their concerns and leaves them exposed to potential criminal lawsuits.
UBS, Switzerland’s biggest bank, 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 then pursue other Swiss banks.
Banks under formal U.S. investigation include Credit Suisse, Julius Baer, British bank HSBC’s Swiss arm, privately held Pictet in Geneva and smaller players such as LLB’s Swiss arm and local government-backed Zuercher Kantonalbank and Basler Kantonalbank.
Ackermann also urged Switzerland, increasingly alone in Europe in holding on to its banking secrecy law, to step up debate with the Organization for Economic Cooperation and Development (OECD) about an internationally binding standard on automatically exchanging client information.
Nearly all EU member states exchange information about what interest payments bank account holders receive. Luxembourg and Austria both recently came under pressure from their European partners and have agreed to sign up to the code, in turn raising the heat on Switzerland.
“There is no reason ... for premature and possibly ill-considered concessions with only regional reach. Now is the time to carefully evaluate options and seek a solution within a broadly accepted framework,” Ackermann said.
“For a global standard to be palatable also for Switzerland, it must reconcile the justified desire to deal with tax evasion with our long-standing policy of protecting financial privacy.”
Prominent bankers including UBS Chairman Axel Weber and lobby head Patrick Odier have dropped their opposition to automatically exchanging information, but the issue remains highly politically charged in Switzerland, where secrecy and privacy is still cherished.
Editing by David Holmes