Swiss Lawmakers Extend Debate on US Banks Probe Plan

   By John Letzing 
 

ZURICH--Lawmakers in the upper house of Switzerland's parliament voted in favor of a plan for many of the Alpine nation's banks to begin handing information to the U.S. Department of Justice investigating alleged tax evasion by Americans, prolonging a legislative debate under pressure to wrap up in the next few days.

The smaller, upper house of Switzerland's parliament voted 26-18 Wednesday to adopt the proposed plan, which would have a number of banks take steps to resolve outstanding issues with U.S. authorities in the midst of a global tax evasion crackdown.

The vote affirms previous approval of the plan in the upper house last week, which was followed by a sharp rejection in the lower house on Tuesday.

In the lower house, lawmakers had raised concerns about the heavy-handedness of the U.S. effort to have them sign off on a measure that would enable banks to sidestep the country's banking secrecy law. Other lawmakers had raised concerns about the lack of detail in the plan regarding potential fines for banks that opt to participate, and the potential legal hazards for Swiss bankers, lawyers and advisers.

The lower house is now expected to again take up the measure as soon as Wednesday afternoon. If it is rejected again, lawmakers in the upper house have resolved to seek an alternative solution with the U.S.--but offered no details as to what that might entail.

The Swiss cabinet had unveiled the plan for a U.S. resolution last month, and indicated parliament should act swiftly to approve it due to the dwindling patience of American authorities. One Swiss bank, Wegelin & Co., has already been indicted in the U.S. and is now defunct. The DOJ reached a deferred prosecution agreement with the country's biggest bank, UBS AG (UBSN.VX), in 2009.

That agreement had UBS admit it helped Americans use Swiss accounts to evade taxes and it had to pay a $780 million fine.

Now, time is running short for the Swiss parliament to approve the plan for a broader group of banks to settle outstanding issues with the U.S.

Parliament's current session ends Friday, and failure to pass the proposed plan would create an unnerving lack of clarity for many of Switzerland's roughly 300 banks, according to Peter V. Kunz, a professor of business law at the University of Bern.

"This is the major problem," said Mr. Kunz, "Swiss banks, and banks in general, need some certainty in their business--and right now no one really knows what's going to happen."

The heated debate in Switzerland's parliament over the proposed plan comes as the country struggles to come to terms with mounting attacks on its legendary bank secrecy. Switzerland remains the world's biggest center of offshore wealth, with $2.2 trillion held there last year, according to data from the Boston Consulting Group.

The DOJ's efforts to locate undeclared offshore assets gained steam in the wake of the 2008 financial crisis, as U.S. and other governments sought to recover lost tax revenue. The UBS agreement was a key step for the DOJ in Switzerland, where it has since sought to track the undeclared wealth that dispersed from Switzerland's biggest bank to other institutions.

Roughly a dozen Swiss banks have already been cooperating with U.S. authorities as part of their tax probe, including Credit Suisse Group AG (CSGN.VX) and Julius Baer Group AG (BAER.VX).

Credit Suisse has set aside 295 million Swiss francs ($321 million) to eventually settle U.S. tax matters.

Write to John Letzing at [e-mail]