Court clocks UBS

UBS: Oswald Gruebel, UBS's newish chief executive, has set ambitious targets for a turnaround at the Swiss giant. However, he will be blown off course if the Swiss government does not swiftly resolve a legal challenge to its agreement to hand over information on thousands of suspected tax evaders to the US authorities.

Last month, a Swiss court ruled that the deal was illegal. This has already taken its toll on UBS, whose shares have fallen 7 per cent since the ruling.

The Swiss authorities also appear to have been caught by surprise. The government says it will first seek to reopen negotiations with the Americans. Failing that, it will ask for retrospective parliamentary approval for the US treaty.

 

Under the deal with the US tax authorities, UBS has agreed to hand over the details of some 4,450 of its American clients suspected of tax evasion.

But the US authorities have already collected the names of almost 15,000 Americans who have taken advantage of a tax amnesty to confess to holding foreign bank accounts. UBS is hoping that at least 10,000 of these are the bank’s clients, and that the Americans will now drop the matter.

However the United States has little incentive to help. The more uncertainty, the more likely that rich Americans will disclose their offshore accounts.

So the Swiss government will probably have to seek parliamentary backing for the data handover. This could prove tricky. The Swiss are famously proud of their neutrality and independence, and resent anything that looks like foreign interference. Moreover, the government does not have a lot of time — the treaty envisages the data handover taking place by the end of August.

If an agreement cannot be reached, the US authorities could withdraw UBS’s American licence, destroying a large chunk of the bank’s business.

While this remains unlikely, the continuing uncertainty can only damage UBS and the Swiss government, both of whom have plenty of other problems on their hands. The government has another tax battle looming after German chancellor Angela Merkel signalled this week that Germany might pay for stolen Swiss banking data.

Even if the US standoff can be resolved, Swiss banking secrecy will remain under attack.