There is no doubt the landmark tax deal between the US and Switzerland this week is a success for UBS, Switzerland’s biggest bank by assets under management.
By averting a lengthy and painful trial and dodging the bullet of another settlement fine which could have rendered the bank’s capital ratio dangerously thin, UBS is now facing the difficult question of returning to profitability and regaining clients’ trust.
But what seems as the end of a troublesome era for UBS may turn out to be the beginning of more headache for the rest of the Swiss banking industry: an important aspect of the tax deal between Switzerland and the US is the agreement to provide account information on other Swiss banks should the IRS suspect any tax evasion practices in those institutions.
No bank will be shielded by the famous banking secrecy anymore now that the diplomatic showdown between the US and Switzerland has set an important precedent for future requests.
In addition to that, other countries like Germany, Italy or the UK could take the settlement with the US as their cue to make similar requests to Swiss banks and the Swiss government.
And this at a time when foreign investors’ trust in Swiss institutions (with exceptions) is shrinking: according to statistics from the Swiss National Bank, holdings of securities by foreign investors have fallen around 19 percent or 520 billion Swiss francs ($546 billion) from a year ago.
Does this mean the sacred banking secrecy is lifted? No — at least not in correct legal terms and according to the Swiss government.