Resolving tax evasion allegations from U.S. authorities will likely be costly for several Swiss banks, but it’s better than protracted litigation, says Fitch Ratings.
The rating agency reports that Switzerland’s federal government has approved a draft bill that would create the legal basis for Swiss banks to cooperate with U.S. authorities in matters relating to U.S. offshore clients. “If passed by parliament, this would allow banks to negotiate individual closing agreements with the [U.S. Department of Justice],” it notes.
Fitch says that resolving the allegations from the U.S. authorities will probably be costly for the banks involved, but that it “should remove significant uncertainty for the banks”; which, it believes, is preferable to a lengthy dispute.
And, it expects all banks with exposure to U.S. offshore clients to cooperate with the DoJ, “… because we understand that the U.S. authorities could take further legal steps should a bank decide not to participate in the proposed solution,” it notes; adding that, if passed, the bill would likely come into force on July 1 for one year. “We expect the banks to start negotiating agreements with the U.S. authorities shortly thereafter,” it says.
The framework for settling these issues, including how any fine would be calculated will be disclosed by the U.S. authorities once the proposed bill has been passed by the Swiss parliament, Fitch observes.
“We expect any fine or indemnification to be manageable for the Swiss private banks we rate as none of them has strategically targeted undeclared U.S. offshore clients after UBS’s settlement with the U.S. authorities in 2009 over tax evasion, to our knowledge,” it says. “But the final settlements or fines for tax evasion matters are difficult to predict and should the amounts significantly exceed our expectations, this could be negative for these banks’ ratings.”
Fitch suggests that if banks did actively pursue undeclared U.S. offshore clients after the 2009 settlement with UBS, this would likely to incur heftier fines.