UBS could collapse if bank loses license in US

| 02/02/2010

Cayman Islands, Grand Cayman business news, offshore banking, USB(CNS): Shares in the Swiss bank UBS fell sharply yesterday following remarks made on Sunday by the country’s justice minister, who had warned that the bank could collapse if talks with the US over the high-profile tax fraud investigation fail. "The actions of UBS in the United States are very problematic. Not just because they are punishable but also because they threaten all of the bank’s activities," said EvelineWidmer-Schlumpf in an interview with a European newspaper. "The Swiss economy and the job market would suffer on a major scale if UBS fails as a result of its licence being revoked in the United States," she told the told Le Matin Dimanche newspaper. (Left: The UBS office on Elgin Avenue)

Switzerland and the US have negotiated an agreement under which UBS would hand over information on some 4,500 account holders to US tax police. But a Swiss court ruling earlier this month put the deal in doubt. If Switzerland fails to give up the names by August, the US is expected to pursue criminal charges against UBS over the bank’slong-running programme to help Americans avoid tax.

A guilty verdict could cause UBS to lose its licence to operate in the US, potentially putting the bank out of business, and many in Switzerland have accused the government of failing to protect UBS.

"We have nothing to blame ourselves for. I don’t think anyone could prove that we acted badly," Widmer-Schlumpf said in the interview.   “We know … the Swiss economy and the job market would suffer on a major scale should UBS fail as a result of its licence being revoked in the United States.” Hans-Rudolf Merz, the Swiss President, has previously warned that UBS’s failure would cost the country’s economy as much as $250 billion.

Last February UBS paid $780 million to settle a civil suit brought by the US, which accused the bank of helping as many as 52,000 Americans to hide money in offshore accounts over several years.

Germany has also added to the pressure, with government officials saying that country will purchase information on accounts if it can do so legally, even if the move puts Berlin on a collision course with Switzerland.

German Finance Minister Wolfgang Schäuble told a news conference on Monday evening that the government was looking for a way to acquire the information — which the government said was offered by an informant in return for €2.5 million ($3.5 million) — without breaching privacy laws or other statutes and hopes to have a resolution soon. The information includes the account details of some 1,500 Germans allegedly hiding money from German tax authorities in Swiss bank accounts, according to people who have been briefed on the matter.

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