Julius Baer Chairman Sees ‘Painful Adjustments’ Over Tax Efforts

Julius Baer Group Ltd. (BAER), Switzerland’s third-largest wealth manager, says it backs the Alpine country’s move toward tax-compliant private banking, as foreign governments address the abuse of offshore accounts.

“The ongoing refocusing of the Swiss financial center on henceforth managing only taxed assets is a logical consequence, which is fully supported by Julius Baer and has already been implemented in our business,” Chairman Daniel Sauter told the firm’s annual shareholder meeting in Zurich today. “It will undoubtedly lead to a few painful adjustments.”

Switzerland, the world’s largest center for offshore wealth, is trying to shed its image as a haven for undeclared funds amid scrutiny from U.S. and European governments. Banks are also under pressure to crack down on tax dodgers as the Swiss government pursues a domestic “white-money” strategy.

Julius Baer, one of at least 11 Swiss financial firms under investigation by the Department of Justice, is in talks with the U.S. to try to resolve a probe of its American cross-border client business closed between 2009 and 2011. While the size of a potential fine remains unclear, legal and accounting costs related to the U.S. matter totaled 38 million Swiss francs ($41 million) in 2012, the firm said on Feb. 4.

The bank may also shut undeclared German accounts if customers don’t address their fiscal duties, Jan Vonder Muehll, a spokesman for Julius Baer, said on April 8. Germany’s Parliament last year rejected a bilateral solution over undeclared accounts in Switzerland after opposition parties said the agreement contained too many loopholes for tax evaders.

Merrill Integration

Julius Baer, established in 1890, exceeded 200 billion francs in client managed assets this year as it began integrating Merrill Lynch’s non-U.S. wealth-management units acquired from Bank of America Corp. The firm has said it expects to absorb as much as 72 billion francs of new customer assets.

Gains in bond and equity prices this year also boosted client funds, Sauter said in his speech. At the same time, regulatory changes are increasing costs, he said.

Julius Baer rose 1.1 percent to 36.10 francs at 11:46 a.m. in Zurich, extending this year’s gain to 11.7 percent, compared with a 1.4 percent advance in the Bloomberg Europe Banks and Financial Services Index.

To contact the reporter on this story: Giles Broom in Geneva at gbroom@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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