Mixed response to US, Swiss deal on UBS

21st August 2009, Comments 1 comment

The deal settling a US lawsuit against Swiss bank UBS got a cautious welcome from analysts Thursday.

Zurich -- The deal settling a US lawsuit against Swiss bank UBS got a cautious welcome from analysts Thursday, as another US case showed authorities there are intensifying their hunt for tax-evaders.

"A sword of Damocles is still hanging over UBS," analysts at Zurcherkantonalbank (ZKB) said, referring to potential further legal problems as the accord is implemented.

On Wednesday, the bank and the Swiss government signed complex agreements with US authorities that should allow UBS to escape charges of assisting tax evasion in the United States without a fine or compensation payment.

The Swiss agreed to process a US request for information on 4,450 UBS American clients who are suspected of tax fraud in return for ending the lawsuit against the bank.

A day after settling the UBS case, US authorities announced they charged a Swiss private banker and a lawyer Thursday with helping wealthy Americans to conceal assets in Switzerland.

Hansruedi Schumacher, executive manager at Swiss private bank Neue Zuercher Bank (NZB), and Matthias Rickenbach, an attorney who provided legal advice and services to US clients, were accused of creating "sham and nominee offshore entities" to hide their US clients' assets and income.

"This is another step in our ongoing effort to pursue hidden offshore assets, no matter where they are located," said US Internal Revenue Service Commissioner Doug Shulman.

 "We're in the early stages of our work to crack down on offshore tax evasion."

Analysts at Helvea said it was unclear if UBS might face further criminal proceedings in the longer term and avoid a penalty or other legal action relating to tax fraud cases.

"It is not really a clean ending," commented Peter Thorne of Helvea. "It could all be a messy process."

After the deal, the Swiss government sold the nine percent stake it acquired in UBS when it bailed it out in October 2008 in response to the global financial crisis.

The Finance Ministry announced Thursday that it had sold its UBS shares to foreign and Swiss institutional investors at CHF 16.5 a share -- the higher end of analyst expectations.

The sale produced a profit of CHF 1.2 billion (EUR 790 million, USD 1.12 billion) on the government's original CHF 6 billion investment.

UBS shares closed on Thursday up 4.54 percent at CHF 17.5, outpacing the wider bourse where the Swiss Market Index rose 0.9 percent.

Loss-making UBS was one of the hardest-hit banks as credit markets froze and stock markets fell in 2008, with its future in doubt as it took massive losses.

"The Board of Directors and the executive management of UBS would like to  thank the Swiss Confederation, the Swiss National Bank and (financial regulator) FINMA for their prudent and resolute course of action from October 2008 to this day," UBS Chairman Kaspar Villiger said in a statement.

Analysts at Vontobel bank welcomed the government pullout, saying it allowed UBS greater flexibility as it sought to rebuild.

"The (sale) is a positive signal that shows the confidence of the Swiss government," said Vontobel's Stefan Schuermann.

Press commentary on the deal with the US authorities was muted, pointing out the impact it could have on Switzerland's standing as a financial centre.

The Neue Zürcher Zeitung (NZZ) said the agreement appeared "at first sight to be to Switzerland's advantage" but it could make many UBS clients nervous and turn themselves in to US authorities of their own accord.

Le Temps said it represented "an American victory."

In the lawsuit, US authorities accused UBS of "systematically and deliberately" violating American laws by promoting offshore accounts for American citizens, targeting up to 52,000 US clients.

It followed a USD 780 million fine imposed by the US authorities on UBS in a similar tax-related case in February.

The lawsuit has hurt the banking giant's attempts to recover from the financial crisis and UBS has been struggling to keep customers.

UBS reported a net loss of CHF 1.4 billion for the second quarter of 2009.

AFP / Expatica

1 Comment To This Article

  • Al posted:

    on 22nd August 2009, 16:58:18 - Reply

    Investors should dump UBS stock. Hopefully UBS will fail and the directors won't get any government bailouts and, hopefully, will face personal bankruptcy and shame. It is even more shameful that Switzerland, a once proud indepedent democratic nation, bowed to the pressures of the USA, Germany, and EU and was forced to break their own Swiss Constitution and laws because the 'big brother' governments in those other countries told them so!