Credit Suisse hives off US operations to shield main bank: reports

6th May 2014, Comments 0 comments

Swiss bank Credit Suisse has created a separate unit for US clients in a bid to shield itself from the impact of litigation over its assistance to US tax dodgers, Swiss media reported Tuesday.

According to Swiss daily Tages Anzeiger, the bank aims to drop all funds belonging to US citizens not residing in Switzerland into a newly created "bad bank" unit called CS International Advisors AG, headquartered in Zurich and with its own separate banking licence.

The bank, Switzerland's second-biggest, has reportedly been informing its off-shore US clients of the shift in recent days.

Credit Suisse did not respond to requests for comment on the report.

According to Tages Anzeiger though, the new bank is meant to shoulder the lion share of the burden if Washington decides to press criminal charges and drag Credit Suisse to court.

Peter Kunz, an economy professor at the University of Bern, told the paper Credit Suisse could expect the consequences of any future litigation to be "a bit less serious" for the whole group once it implements the new system.

A senior US official told AFP on Monday that the probe of Credit Suisse's past practice of helping its wealthy US clients evade taxes by sheltering their funds abroad was almost complete and that criminal charges could be brought within "a few weeks."

And the Wall Street Journal reported that Credit Suisse was about to reach an agreement with the Justice Department that would see it plead guilty and pay a $1.0 billion fine.

In 2009, Switzerland's largest bank UBS was forced to acknowledge it had used Swiss banking secrecy laws to help its US clients avoid paying taxes at home, and had to dish out a $780-million fine to US tax authorities.

Credit Suisse has put aside 895 million Swiss francs ($1.0 billion) to cover any US potential fine.

A damning US Senate report found that the bank at its peak in 2006 had more than 22,000 US customers with Swiss accounts whose assets stood as high as $12 billion -- mainly undeclared to US tax authorities.

Chief executive Brady Dougan apologised in February to US senators for the bank's actions, conceding it had undertaken elaborate efforts to gain new, secret American clients, but blamed the wrongdoing on a small band of rogue employees.

UBS, which no longer has to fear US litigation and staggering fines over past hidden US client accounts, meanwhile said Tuesday that it too was setting up a system meant to shield its main operations from problem units.

The bank said it was creating a new group holding company aimed at making it easier to separate out any divisions that might run into difficulties, thus protecting the rest.

The move is meant to help the bank avoid a repetition of the 2008 crisis, when Switzerland had to step in and save the bank from tanking and dragging the entire Swiss economy down with it.

© 2014 AFP

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