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 to evade taxes, former Deutsche Bank head Josef Ackermann said.
The Swiss parliament is divided over a bill that would let Swiss banks hand over internal information to the U.S. authorities in the hope of avoiding threatened criminal charges – though they still face fines set to total billions of dollars.
Ackermann, chairman of Zurich Insurance, said that Switzerland should accept the offer, though he described it as an “unconditional diktat” that was not an example of “respectful diplomacy” towards a long-standing partner.
“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 to mark the start of the Reuters Global Wealth Management Summit.
“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.”
Ackermann said he expected most members of parliament – many of whom were initially opposed to the government’s plans – would eventually understand the urgency of supporting the legislation, which faced its first formal committee hearing on Monday.
Though he acknowledged that the fines would not be pleasant and could force state-owned banks to seek support, he said that they would not destroy the Swiss financial system.
The Swiss government is asking parliament to rush through the legislation in June, citing a U.S. threat of further criminal charges against more banks.
Since returning from Germany last year, Ackermann has become a forceful advocate for the Swiss financial sector and is a rare senior banker still in a position of power given the departure of other top figures since the financial crisis.
Switzerland’s tradition of banking secrecy has helped to 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 also investigating Swiss banks.
Ackermann, who worked at Credit Suisse earlier in his career, said that Swiss bankers had long operated on the principle that it was legitimate to help foreigners seeking to protect their wealth from high taxes.
“We have to understand that this is no longer acceptable,” he said. “We will have more and more pressure from other parts of the world.”
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, helping the U.S. authorities to pursue other Swiss banks.
Juerg Zeltner, head of the UBS private bank, said he hoped parliament would approve the U.S. legislation for the sake of the industry, even though UBS has settled its tax dispute.
“We need a solution,” he told the Reuters summit. “This is very important for Switzerland and the financial centre.”
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.
Rolf Boegli, head of premium clients at Credit Suisse, said his bank hoped for a deal as soon as possible: “If one thing is bad for the wealth management business, it is uncertainty.”
Luxembourg and Austria both recently agreed to share information on account holders with their European Union partners, raising the heat on Switzerland to do likewise, but bankers said the country should bide its time.
“There is no reason … for premature and possibly ill-considered concessions with only regional reach,” Ackermann said.
He urged Switzerland to step up debate with the Organisation for Economic Cooperation and Development (OECD) to push for an internationally binding standard on exchange of client data.
“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,” he said
Alexander Classen, head of the international operations of Coutts, the private banking arm of Royal Bank of Scotland Group, agreed. “This kind of agreement would have to be applied to every jurisdiction and not Switzerland alone,” he told the summit. “I see no reason why Switzerland should budge until there is a level playing field in place.”
(Additional reporting by Edward Taylor and Emma Thomasson- Editing by David Holmes and David Goodman)