This article fails to address some key issues. The program is voluntary for the Swiss banks. The only banks for which it makes sense to participate are those with a high risk of prosecution and a manageable penalty. Even a high risk bank that cannot afford the Category 2 fines, will stay out of the program, because they have a choice between seeking protection for a possible risk or a certain death through the fines.
What reason does a category 3 bank, who thinks it did nothing wrong, have to go into the program and face the risk of being moved to category 2 based upon its own disclosures. Maybe it will decide to 'let sleeping dogs lie'? And, if you really think you did nothing wrong, why do you have to ask for the US to agree, instead of just defending yourself if attacked. After all, just having had a US customer does not make a bank a criminal organization. The bank is going to have to evaluate its own risk of being prosecuted and being found guilty. If the bank is worried, and can afford the penalty, then why not join? Maybe try for category 3 and switch to category 2 if necessary, perhaps. The US is probably going to closely scrutinize banks who apply for category 3 status, and a bank in the program at that point will have no alternative but to pay the category 2 fines if challenged by the US.
Any bank faced with devastating fines will avoid the program, that much seems clear. There are about 300 banks in Switzerland. The first focus for the US would seem to be to go after the banks who are 'dirty', but didn't join the program because they could not afford the fines.
The banks will have a huge incentive to avoid participating in the program. If a bank had 50 US customers with an average $2 million deposit, the fine could reach $50 million. (By the way, it doesn't mean that the bank acted illegally with all 50 customers, but the same across the board penalty structure will apply to all customers in the voluntary program.) The annual gross fees earned by the bank could have been half a point or less, or maybe $500k/yr., on these $100 million of deposits. The net income to the bank on $100 million of deposits could have been $100k - $200k/yr., after costs of doing business are calculated. A $50 million fine from a business that might have generated this level of income is huge, and will provide a significant disincentive for a bank to participate. Moreover, even if a bank is later targeted, will the bank have to pay more than 50% to resolve the matter?
One interesting point raised in the article deals with Swiss banks who still have undisclosed US customers. Is there really such a beast? Banks all around the world are kicking out US customers. It's hard to believe there are really some Swiss banks who still have undisclosed US customers.
It would be interesting to see some discussion on these issues. I am having trouble understanding why great numbers of banks will go into this voluntary program.Readers of this blog entry may be interested in going to noone's actual response, here, in case other readers have posted responses to that comment rather than to this blog.