The Swiss government has been resisting cooperation until now because the secrecy of its banking system has long made the country an offshore money haven for wealthy foreigners. But scrutiny in Europe of tax havens has been widening and pressure from the United States, including a number of arrests of Swiss bankers who traveled to the United States, started to increase pressure on Switzerland to come to an agreement.
For Swiss banks, the agreement ends uncertainty about possible prosecution, but the final size of the penalties remains to be decided. Even banks that will not have to pay large penalties that could hurt their finances and operations are bracing for spiraling costs because of the additional data they will be required to dig up and provide to authorities.
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Sindy Schmiegel Werner, a spokeswoman for the Swiss Bankers Association, said the deal was "the least bad solution." "There's no doubt that this will be very, very painful for the banks," she said.
Despite greater tax scrutiny, money continued to flow into Swiss banks from abroad over the past years. Amid the chaos of the European debt crisis and growing fears about the safety of deposits in some European banks, Switzerland continued to be considered a safe haven for investments. Switzerland was the top destination for offshore wealth, defined as assets booked in a country where the investor has no legal residence or tax domicile, in 2012, registering $2.2 trillion, followed by Hong Kong and Singapore, according to the Boston Consulting Group 2013 Global Wealth report.