UBS: The Swiss and US governments may be ready to compromise. At the last minute, the two have agreed on a three-week delay in the information-disclosure case against UBS. The Swiss bank is caught between a US demand to release details on 52,000 accounts and a Swiss legal requirement to protect the account holders’ privacy.
The trial was supposed to begin on Monday. As recently as last Wednesday, both sides were talking tough. The US government was set to explain how it would take control of UBS assets in the US while the Swiss planned to seize account information rather than let the Americans get their hands on it.
UBS could do little but watch. But the bank and the Swiss authorities are clearly both in the mood for compromise.
UBS has already pleaded guilty to criminal charges related to its US business. Having long since accepted that Swiss secrecy can play no role in promoting its private banking franchise, it just wants to know the new rules, so it can start playing by them.
Switzerland would like to avoid “fishing expeditions” – account probes without evidence of possible wrongdoing – but isn’t in a great position to defend its banking principles. The nation is in the process of negotiating and ratifying 12 double-taxation agreements which will, for the first time, allow foreign governments to request account information for clearly identified suspected tax evaders.
In public, the US has shown no appetite for anything less than unconditional surrender. But now that the Swiss government is speaking up for the nation’s largest bank, there may be some second thoughts in Washington.
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Diplomatic concerns could help the Swiss government squeeze out some concessions. For example, the US may agree not to demand data without some evidence of suspicious behaviour.
Still, for the Swiss, as for other traditional tax havens, the big battle has already been all but lost. These countries used benign neglect of tax evasion by bank customers as a competitive tool. That sort of ethical arbitrage is no longer tenable.
