Some of the news reports are:
- Bank Frey ceases banking activities (Swissinfo.ch 10/18/13), here. Excerpt:
“As a result of developments in recent years, circumstances and challenges have presented themselves, especially in Switzerland, that mean it no longer makes sense for a small bank to continue its cross-border services,” said Markus A. Frey, thechairman of the board who founded the institution in 2000. “Bank Frey will therefore cease its operative business activities as a bank.”
- Alice Baghdjian, Swiss private bank shuts up shop over U.S. tax row (Reuters 10/18/13), here. Excerpts:
Swiss private bank Frey & Co. is to close due to "unsustainable costs" stemming from the country's dispute with the United States over alleged tax evasion, it said on Friday, making it the second Swiss bank to shut as a result of the row.
Switzerland and the United States have been at odds since 2010 over a U.S. campaign to get Switzerland's banking secrecy laws cracked open so it can identify possible U.S. tax evaders, a campaign which felled Wegelin, Switzerland's oldest bank, in January following an indictment.
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After shareholders voted to close Frey on Thursday evening the bank said increased regulation of financial institutions has resulted in a rise in costs in recent months, meaning it was no longer possible for a small private bank to keep running.
"As a result of developments in recent years, circumstances and challenges have presented themselves, especially in Switzerland, that mean it no longer makes sense for a small bank to continue its cross-border services," Chairman Markus A. Frey said in a statement
However, the business was financially healthy and would not be liquidated, the bank said.
- Robert W. Wood, Swiss Bank Frey To Close Over IRS Investigation (Forbes 10/17/13), here.
Addendum 10/19/13 12:30pm:
The following are excerpts from Stephanie Soong Johnston, Swiss Bank Ends Operations, Citing U.S.-Swiss Tax Dispute, 2013 TNT 203-8 (10/21/13):
"The writing's on the wall, and their indictment appears to be imminent," said Jeffrey A. Neiman, a former assistant U.S. attorney who led the prosecution of Swiss bank UBS and is now in private practice in Florida. If the bank is indicted, the DOJ will have a harder time collecting penalties, Neiman told Tax Analysts. "But in reality the Justice Department is getting the blood it wants with the extinction of another Swiss bank," he said.
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According to Bryan C. Skarlatos of Kostelanetz & Fink LLP, Bank Frey's closure will not prevent the DOJ from continuing its investigation. "If the DOJ cannot reach an agreement with the bank itself, that only increases the chance that the DOJ may look to hold certain individuals responsible for the bank's actions," he said.
Scott D. Michel of Caplin & Drysdale said that closing the bank before it could be indicted may affect the DOJ's tactics. "Bank Frey, as with Wegelin, has no presence in the United States, and therefore the principal leverage that the DOJ would have against it would arise from a criminal indictment causing reputational and other damage," Michel explained. The DOJ also could seize Bank Frey's U.S. correspondent accounts, as it did in the Wegelin case, he added.
Bank Frey's closure also prevents an indictment or a deferred prosecution agreement from disrupting operations, Michel said. "Note that one factor the DOJ considers in deciding whether to indict a business entity is collateral damage, [such as whether] putting the entity out of business creates disruptions, loss of jobs, etc.," he said. "Ironically, the closure of the bank means that this issue may well disappear from the factors under consideration."
According to Thierry Boitelle of Bonnard Lawson in Geneva, Bank Frey's closure is a harbinger of smaller banks' futures in Switzerland. "There is simply so much compliance in force now and even more rapidly on its way that small banks can no longer cope with the costs of being compliant," he said. "The risks of being noncompliant are enormous, that the U.S.-Swiss dispute clearly demonstrates."The following are links to the bios of the persons quoted in the article: