Swiss bank Valiant first to agree to US tax deal, more to follow

By Katharina Bart and Oliver Hirt

ZURICH (Reuters) - Valiant has become the first Swiss firm to agree to crack down on wealthy Americans evading taxes and as many as a third of the country's banks are expected to follow in the latest step in a long-running dispute with the United States.

The deal between the United States and Switzerland, agreed in August, is part of a U.S. drive to lift the veil of Swiss bank secrecy. In 2009, this led to UBS paying $780 million in a settlement where the bank agreed to hand over U.S. client names with secret Swiss accounts.

 

The U.S. pursuit of tax dollars sheltered in offshore accounts has piled pressure on Switzerland, the world's largest offshore finance centre with more than $2 trillion in assets.

The Swiss government in June bowed to repeated attacks on banking secrecy, deeply embedded in the country's culture, and will share data on foreign depositors if a global standard is established.

Under the latest U.S. deal, Swiss banks were given until Monday by their regulator to say whether they would take part in the government-brokered programme open to a host of second-tier Swiss banks.

The programme, which lapses at year-end, requires the banks to hand out some previously hidden information and face penalties of up to 50 percent of assets they managed on behalf of wealthy Americans. If the banks shun the U.S. offer, individual firms and senior staff risk criminal prosecution.

The regulator FINMA said on Tuesday that most had done so, and that it expected several more to do so shortly, without disclosing what the banks had decided.

Valiant Holding and Berner Kantonalbank , two mainly retail banks, said they would come clean on any past transgressions and face up to fines.

The fines are scaled to reflect how egregiously the banks acted in their dealings with U.S. customers. Fines would have to be disclosed to investors because they could have an impact on share prices.

A third -- Zurich-based private bank and securities firm Vontobel Holding AG -- said it would also participate, but declared itself free of hidden U.S. client funds. The bank began transferring business with wealthy Americans into an entity registered with the Securities and Exchange Commission in 2008, when the crackdown on Switzerland's banks intensified.

How many of Switzerland's 300-plus private banks come forward under the programme is also key for banks facing criminal investigations, which includes some of Switzerland's biggest banks such as Credit Suisse and Julius Baer and Pictet & Cie.

A host of listed private banks such as EFG International and Banque Cantonale de Geneve said they had yet to make a decision. St. Galler Kantonalbank , which owns private bank Hyposwiss, said it had informed the Swiss regulator of intention, but would only tell investors what it had decided when it had been formalised by its board.

These publicly-listed banks, which are subject to disclosure rules, give the first indication of how many firms will cooperate with the U.S. authorities under the plan.

But most Switzerland's private banks are not listed and under no obligation to make their decision public.

Major player Lombard Odier & Cie said it is still evaluating what to do. Others such as J. Safra Sarasin, Union Bancaire Privee and Mirabaud did not respond to request for comment on Tuesday.

A legal expert said FINMA's Monday deadline was merely intended to take the temperature of Swiss banks' intentions, and that they have three more weeks until the legally-binding deadline to take up the deal lapses.

"I think roughly 100 banks will end up coming forward - the coming weeks will show how many succumb to the pressure," Peter V. Kunz, professor of business law at Berne University, said.

A failure to cooperate could also hold up a settlement for Credit Suisse, Julius Baer, Pictet, and local government-backed Zuercher Kantonalbank (ZKB), which have seen settlement talks with U.S. justice officials frozen pending a solution for the wider industry.

(Editing by Matthew Tostevin and Jane Merriman)