By John Letzing
ZURICH--Punishment might be a plus for Swiss banks.
Wednesday, the Swiss finance department sketched the broad
outlines of a plan that will nudge the country's banks toward
resolving legal disputes with U.S. authorities if it is approved. A
handful of banks, including Credit Suisse Group AG (CSGN.VX) and
Julius Baer Group AG (BAER.VX), are already under investigation by
U.S. authorities for allegedly having helped wealthy Americans
evade taxes.
The Swiss plan chips away at the country's famed banking secrecy
by allowing banks to share some information, though not client
account data, with U.S. authorities. The U.S. can use that
information to levy fines against individual banks, which analysts
say will help the financial industry put its problems in the
past.
The proposal is "preferable to a lengthy dispute with U.S.
authorities," Fitch Ratings analysts said Thursday in a report. The
report said the plan will remove uncertainty for the banks, letting
them get back to normal business.
Although the plan has been widely panned by Swiss observers, who
argue the Swiss rolled over in the face of U.S. pressure, investors
accepted the deal in stride. In afternoon trading, shares of Credit
Suisse were up nearly 2% at CHF28.35, while shares of Julius Baer
were up 0.1% to CHF37.85.
UBS AG (UBS), which has already settled with the U.S.
government, was down marginally at CHF16.98, while the benchmark
SMI Index was up 0.04%.
Of course, the plan isn't a cure-all for the banking sector.
Much of the detail is unknown, including how much the U.S. may
fine banks found to have helped tax cheats. And the plan still
needs to be approved by the Swiss parliament, which will address it
in June. Delays or a rejection could set the industry back
again.
It may also set the stage for other countries, particularly
Switzerland's European neighbors, which have been pushing Bern on
tax evasion issues separately to the U.S.
Still, analysts say banks will probably benefit from the plan,
which represents a step forward in what had been a slow-moving
clash. Bigger banks, like Credit Suisse and Julius Baer, should be
able to weather potential fines though surprisingly large penalties
might swamp the finances of smaller banks.
Credit Suisse has set aside 295 million Swiss francs ($307
million) to deal with U.S. legal issues, while Julius Baer has said
in a statement it is confident it has the resources to deal with
the matter. UBS paid a $780 million fine for aiding tax evasion in
2009.
Some analysts say the erosion of banking secrecy--long a
competitive advantage for Switzerland's banking industry--might
help the industry find new strengths. Since the bailout of UBS
following the financial crisis, Swiss authorities have required
banks here to carry fatter capital cushions than their competitors
in other countries.
Pete Hahn, a lecturer at the Cass Business School in London,
said Swiss banks are sturdier than some of their rivals because
they maintain capital bases nearly twice as large.
That, Mr Hahn said, "might end up being their new competitive
advantage."
Write to John Letzing at john.letzing@wsj.com
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