Vontobel Holding AG (VONN) Chief Executive Officer Zeno Staub said a U.S. initiative to reveal undeclared accounts in Switzerland will speed up the disappearance of one third of the nation’s banks.
“I would expect it accelerates the process,” the CEO of the Zurich-based bank and brokerage told reporters at a briefing in London today, referring to an Aug. 29 U.S. Department of Justice program for Swiss financial firms to volunteer information and pay fines to avoid prosecution.
Hundreds of banks may be covered by the U.S. plan to punish firms that used accounts to help American clients evade the Internal Revenue Service. Banks that seek to avoid prosecution for fostering tax evasion through secret accounts held by U.S. clients face penalties of as much as 50 percent of the value of those assets under the plan announced by the U.S. and accepted by the Swiss government last month.
The accord lets Switzerland, the world’s largest offshore financial center with about $2.2 trillion of assets, resolve talks spanning two years after U.S. criminal prosecutions eroded bank secrecy. PricewaterhouseCoopers LLP said in a report earlier this year that more global wealth-management firms see increasing mergers, with more than a third of those surveyed forecasting a “significant consolidation” over the next two years.
UBS AG, the world’s largest wealth manager according to Scorpio Partnership, avoided prosecution by paying $780 million in 2009, admitting it aided U.S. tax evasion and handing over data on 4,500 accounts. Wegelin & Co., the oldest Swiss private bank, pleaded guilty in January, paid $74 million and closed its doors.
The number of banks in Switzerland will drop to about 200 from more than 300 today, said Staub, 44. Some smaller banks are considering switching regulatory licenses to become asset managers to help eliminate regulatory costs, while others may be acquired or close, he said.
The Justice Department expects Swiss banks seeking to avoid prosecution to disclose their cross-border activities, give detailed account information on U.S. clients, describe other banks that received secret accounts and cooperate with requests for information.
“I haven’t yet fully made up my mind” how Vontobel will respond, said Staub. Banks that consider themselves having violated U.S. tax law must request non-prosecution agreements by Dec. 31. Other firms that assert they are compliant can request a non-target letter from the Justice Department.
The U.S. has said it will also continue criminal probes of 14 banks that aren’t eligible for those options under the voluntary program. Credit Suisse Group AG, the nation’s second-biggest bank, Julius Baer Group Ltd. (BAER) and the Swiss private bank of HSBC Holdings Plc. (HSBA) are among the firms being probed. Rahn & Bodmer Co., Zurich’s oldest bank, is also under investigation, it said yesterday.
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