Swiss Bankers Expect to Share Data for Tax Purposes (11/10/13)

Swiss bankers are coming increasingly to the realization that bank secrecy, long a profit center for those banks, must yield to other countries' fiscal needs.  See Most Swiss bankers believe banking secrecy's days are numbered (Reuters 11/5/13), here.  Excerpts:

Nearly two-thirds of Swiss bankers believe Switzerland will share data on foreign depositors with its neighbours by 2016, according to a study released on Tuesday. 

The country is the world's biggest offshore financial centre with more than $2 trillion in assets under management, but is under huge pressure from the European Union and United States to end bank secrecy as cash-strapped countries fight tax evasion. 

The study, involving 49 private banks or independent asset managers and compiled by consultants KPMG, reflects a growing resignation among bankers in Switzerland to attacks on banking secrecy following a U.S. crackdown which has felled two private banks in the country and cost UBS $780 million in fines. 

Automatically sharing data would represent a shift away from a clean-money strategy the country has been pursuing, which aims to sweep bank accounts clean of undeclared funds with additional compliance standards for bankers. 

"In our opinion the "whiter than white" strategy of the Swiss government and parliament may be obsolete, as a majority of respondents believe automatic exchange of information could be in force within three years," the study's authors said. 

A government panel has recommended the Swiss government prepare to share data even before a global standard is established, but the issue remains deeply divisive amongst lawmakers.

What this means is less lucre -- the spread they make for helping their clients cheat on taxes -- to go around, and correspondingly more capital requirements for Swiss banks.  See Giles Broom, Swiss Private Banks Need to Double Assets, KPMG Reports (Bloomberg  11/5/13), here.

Wealth managers also said the nation with more than 300 banks is ending its tradition for financial secrecy, in response to pressure from foreign fiscal authorities. More than 60 percent of respondents expect a system of automatic exchange of information between tax collectors in different countries to be introduced within three years, meaning banks would provide data on cross-border client accounts that could be passed to customers’ home tax authorities. 

Most private bankers can expect pay to stagnate or decline as more than 40 percent of respondents forecast employee compensation to drop at least 15 percent by 2022, KPMG said. Only 9 percent of respondents expect remuneration to increase compared with today’s levels, according to the report.

That said, consider the rerport by the Tax Justice Network, Switzerland Remains No. 1 for Secrecy in Tax Justice Ranking (Bloomberg 11/7/13), here.  Excerpts (with emphasis added by JAT):

Switzerland, the world’s largest center for cross-border wealth management, retained the top spot in a financial-secrecy index by the Tax Justice Network, a London-based campaign group. 

Switzerland, which continues to attract money from poorer countries, was ranked No. 1 even after succumbing to pressure from the U.S. to cooperate with a probe of the Swiss financial industry and after signing more than 40 bilateral agreements on tax information administrative assistance, the London-based Tax Justice Network said in a report today. 

Luxembourg, Hong Kong, the Cayman Islands and Singapore trailed Switzerland in the benchmark, which is published every two years. The U.S., which topped the index in 2009, placed sixth in the study of 82 jurisdictions. 

“In line with a shrinking international tolerance for financial secrecy, Switzerland has made a few not insignificant concessions on secrecy, agreeing to exchange information on a limited basis with selected other jurisdictions, while largely rebuffing efforts for greater transparency toward other countries, particularly weaker and more vulnerable developing countries,” the report said. 

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Switzerland is unlikely to move from the top spot in the secrecy ranking unless the financial industry shifts its focus from gathering assets to implementing more transparent, spontaneous cooperation with other countries to counter tax evasion, according to Markus Meinzer, a researcher at the Tax Justice Network based in Marburg, Germany. 

“Swiss bankers are having a hard time because on the one hand they are being told they have to get clean, and on the other hand they still have performance targets to achieve,” Meinzer said in a phone interview. “To fully show its integrity, Switzerland has to sign up for automatic exchange of information.”