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RPT-Fitch: Swiss Banks' US Tax Dispute Resolution Costly, Necessary
May 30, 2013 / 10:18 AM / 4 years ago

RPT-Fitch: Swiss Banks' US Tax Dispute Resolution Costly, Necessary

May 30 (Reuters) - (The following statement was released by the rating agency)

A solution of the dispute between the US authorities and several Swiss private banks, who have allegedly helped US citizens evade tax, is likely to be costly for the banks involved, Fitch Ratings says. However, we believe yesterday’s proposal by the Swiss government should remove significant uncertainty for the banks and in the medium term is preferable to a lengthy dispute with US authorities.

Litigation risks for Swiss private banks have increased in recent years and their current ratings reflect the still considerable costs relating to US offshore clients and other legal risks. We expect any fine or indemnification to be manageable for the Swiss private banks we rate as none of them has strategically targeted undeclared US offshore clients after UBS’s settlement with the US authorities in 2009 over tax evasion, to our knowledge. But the final settlements or fines for tax evasion matters are difficult to predict and should the amounts significantly exceed our expectations, this could be negative for these banks’ ratings.

We anticipate all rated banks with exposure to US offshore clients to cooperate with the US Department of Justice (DoJ) because we understand that the US authorities could take further legal steps should a bank decide not to participate in the proposed solution.

The framework of the settlement including how a fine, if any, would be calculated will be disclosed by the US authorities once the proposed bill has been passed by the Swiss parliament. We expect that the banks’ behaviour post UBS’s 2009 settlement will be relevant in determining the fines. Active acquisition of undeclared US offshore clients during this period is likely to incur heftier fines.

The US authorities have made general inquiries into the US wealth management activities of three rated Swiss banks, specifically Credit Suisse, Pictet and Zuercher Kantonalbank. Two further rated banks, Lombard Odier and EFG International are currently not subject to such inquiries to our knowledge.

The Swiss federal government yesterday approved a draft bill to create the legal basis for Swiss banks to cooperate with US authorities in matters relating to US off-shore clients. If passed by parliament, this would allow banks to negotiate individual closing agreements with the DoJ and would thus avoid any further investigations or even indictments by US authorities.

If passed according to the current time-table, the bill will come into force on 1 July 2013 for one year only. We expect the banks to start negotiating agreements with the US authorities shortly thereafter.

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