Switzerland's banks on Tuesday issued an unusually direct apology for their role in helping tax cheats, following a landmark settlement with U.S. authorities which could threaten the existence of some firms.
The banks do not know the ultimate cost of a government settlement to a long-running U.S. drive to pierce the veil of Swiss bank secrecy. They have until the end of this year to come forward over tax evasion by their U.S. customers, under a deal struck with U.S. investigators to allow some banks to pay fines to avert prosecution.
"It was not because we lacked skills and knowledge that we found ourselves in these unfortunate situations. It was because we acted wrongly and we displayed wrong conduct," Swiss bankers association chairman Patrick Odier told a news conference on Tuesday.
"I regret this all the more because we have damaged the reputation of the entire Swiss financial center."
The apology is the strongest wording yet from a representative of Swiss private banking, which has been buffeted by massive pressure on banking secrecy and various investigations of its banks from U.S. and European officials.
Odier said Swiss regulators had assured him that the Swiss banking industry can shoulder the fines attached to the U.S. settlement. Nevertheless, the deal may jeopardize the existence of Swiss banks that focused on attracting wealthy Americans and helping them hide their funds in offshore accounts to escape detection by tax officials.
"There may be a few exceptions: banks which concentrated too much on these business activities may run into difficulties."
The lobby has consistently advocated settling the issue by making amends. But many banks were taken aback at fines which, in proportion to their size, could dwarf the $780 million paid by UBS in 2009 to settle a similar investigation.
Switzerland's oldest bank, Wegelin & Co, shut its doors permanently after more than 2 1/2 centuries following its guilty plea to conspiracy over tax evasion. The bank was later sentenced to pay $58 million.
The U.S. deal will apply to about 100 second-tier Swiss banks. They could have to disclose some previously hidden information and face penalties of up to 50 percent of assets they managed on behalf of wealthy Americans.
But the settlement does not cover banks already under U.S. criminal investigation, including some of Switzerland's biggest banks such as Credit Suisse and Julius Baer.
First published September 3 2013, 5:59 AM