Swiss Upper House Approves Plan to Hand Bank Data to U.S.

By John Letzing

ZURICH--The upper house of Switzerland's Parliament voted Wednesday to approve a controversial plan that would allow the country's banks to submit information to U.S. legal authorities investigating alleged tax evasion by Americans.

Lawmakers voted 24-15 to accept the proposed plan, which would allow participating banks to sidestep Switzerland's longstanding bank secrecy laws and provide information to the U.S. Department of Justice. The plan, proposed late last month, would allow banks that had problematic dealings with American clients in the past to negotiate settlements.

The vote follows a recommendation on Tuesday by the upper house's economics committee to reject the proposed plan.

The plan will now move on to the lower house of Parliament, which is expected to vote on it next week. If the lower house blocks the measure, Parliament is expected to extend its consideration.

The Swiss Cabinet, which presented the proposed plan to Parliament, has cautioned lawmakers that they need to act quickly to pass the measure. The Cabinet indicated that if the legislation is not passed, the U.S. DOJ may hit Swiss banks with indictments and potentially severe fines.

Switzerland's biggest bank, UBS AG (UBSN.VX), has already weathered a U.S. DOJ probe that resulted in a $780 million penalty in 2009 and an admission that it helped Americans evade taxes with Swiss accounts. The country's oldest bank, Wegelin & Co., was indicted in the U.S., pled guilty earlier this year to helping U.S. clients avoid taxes and is now defunct.

However, Swiss lawmakers have raised concerns about the lack of specifics in the proposed plan-such as the size of potential fines to be faced by participating banks. Christoph Blocher, a leader of the right-wing Swiss People's Party, has estimated that the total cost to Switzerland's banks will be as much as 10 billion Swiss francs ($10.8 billion), though he and his colleagues lack precise figures.

Mr. Blocher's party, which holds the largest voting bloc in the lower house of Parliament, issued a statement on Tuesday that it plans to reject the proposed plan. "Switzerland must not throw its constitutional principles overboard" by rushing it through, the party said.

Credit Suisse Group AG (CSGN.VX), which has already been cooperating with the DOJ by providing information, has set aside CHF295 million to deal with any resulting penalties. Analysts estimate Julius Baer Group AG (BAER.VX), which is also already cooperating with U.S. authorities, may be hit with between CHF200 million and CHF500 million in penalties. The potential cost to many of the country's other roughly 300 banks is unclear.

How third-party Swiss attorneys and advisors found to have helped Americans to evade taxes by stashing assets in local banks will be treated is also unclear.

The Swiss Institute of Certified Accountants and Tax Experts has said in a statement that it's "not in a position to estimate the extent of the negative impact on our members should the proposal be adopted" because of the lack of details.

Write to John Letzing at [e-mail]