“The situation would be sorted out within the next 12 to 18 months,” Odier, 58, told reporters in Zurich today. “That’s the advantage of having a program.”
Hundreds of banks may be covered by an accord between the U.S. and Switzerland over how to punish firms that used accounts to help American clients evade the Internal Revenue Service. Swiss 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. government on Aug. 29 and accepted by the Swiss.
The SBA, which has more than 300 members, agreed by a “definite majority” to support the program as it’s the sole remaining solution for Switzerland after more than two years of government talks, Odier said.
“We don’t know the sum of money that might be involved,” said Odier, who is also senior partner at Lombard Odier & Cie., Geneva’s oldest private bank. While most firms will be able to cope with the penalties, “banks that are too small and too focused could have really serious consequences,” he said.
Profit Declines
Swiss banks are already suffering pressure on margins from increased compliance and regulatory costs and after income from trading, commission and services fell last year. Aggregate net income slumped to 186.1 million francs ($200 million) in 2012 from 13 billion francs in 2011, with 43 banks posting a loss, according to the SBA’s annual banking barometer published today.
Aggregate operating profit slipped 0.2 percent to 59 billion francs even as assets under management increased by 320 billion francs to 5.6 trillion francs. The proportion of foreign assets was unchanged at just over 50 percent, the study found.
The U.S. has said it will continue criminal probes of 14 banks while allowing others not already under investigation to avoid prosecution by paying penalties and disclosing accounts under the program announced last week. Credit Suisse Group AG, the nation’s second-biggest bank, Julius Baer Group Ltd. and the Swiss private bank of HSBC Holdings Plc. are among the firms being probed. That group should be able to settle disputes sooner than the rest of the industry, Odier said.
U.S. Prosecutions
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 and paid $74 million.
Since 2009, the U.S. has prosecuted 68 account holders and more than 30 banking professionals for offshore tax crimes. The Department of Justice 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 under a 1996 U.S.-Swiss double taxation agreement, in addition to paying fines.
Arrangements to resolve the dispute over undeclared “legacy” accounts won’t deter Swiss firms from managing taxed cross-border assets for Americans in future, Odier said in an interview on the sidelines of today’s press conference.
Firms including UBS, Pictet & Cie. — the nation’s largest closely held private bank — and Lombard Odier all have investment advisers registered with the U.S. Securities and Exchange Commission that oversee assets for Americans.
“Our U.S. clients for the future will certainly be well-served by this SEC-registered company when it comes to asset management, and this is our core business,” Odier said.
