Special Report: The battle for the Swiss soul

It has come to this: Swiss banks, under pressure from countries such as the United States, France and Germany, have been giving up their secrets, in some cases handing foreign tax authorities the names of their account holders. To avoid being blacklisted by the Organization for Economic Cooperation and Development, the Swiss government has agreed to share more information with foreign authorities hunting tax cheats.

The foreign assault has opened up a huge rift inside the fiercely independent Alpine nation.

Some bankers, as well as many academics and centrist and left-leaning politicians, think the country should bow to the inevitable and abandon strict secrecy. The pragmatists include big banks like UBS AG and Credit Suisse Group AG, which argue that to survive they have no choice but to surrender more information about their customers and close the accounts of those who won’t come clean.

But a conservative old-guard, including politicians from the powerful right-wing Swiss People’s Party and the heads of smaller private banks, sees such a surrender as a betrayal not just of clients but of core Swiss values. Client confidentiality – the “duty of absolute silence” – has been part of Swiss law since 1934, and a tradition for centuries, helping Switzerland prosper as its neighbors were repeatedly wracked by war.

Josef Ackermann, the former boss of Deutsche Bank who recently returned to Switzerland to take up a job as chairman of Zurich Insurance, has expressed alarm at the discord and called on Switzerland to resist international attacks.

“It must not be that the big powers chip away at the legal order of the small ones,” Ackermann said in a March speech to Zurich’s business elite. “Our biggest problem seems to be that we sometimes allow ourselves to be intimidated unjustifiably under pressure from abroad and we don’t have sufficient confidence in our own strengths.”

The sense of betrayal was keen among conservatives, because Hummler, a straight-talking former head of the Swiss Private Bankers’ Association, had long been one of the most ardent public defenders of bank secrecy. In 2009 he told Der Spiegel magazine that tax evasion by Germans was a “legitimate defense by citizens” against a “disastrous social welfare state.”

The St. Gallen banker who bought Wegelin’s non-American business has broken with that philosophy. Raiffeisen boss Pierin Vincenz raised heckles early last year when he became the first top banker to say Switzerland will ultimately have to accept the automatic transfer of bank client data to foreign tax authorities.

“We are in a real transformation process,” he told Reuters. “We grew up with bank secrecy and it is hard for us to open up, even if it is just about clearing up this tax evasion question.”

Patrick Odier, president of the Swiss Bankers Association (SBA) and senior partner of Geneva-based private bank Lombard Odier, also defends the code of secrecy.

“Automatic exchange of information goes against the core values of not only the Swiss banking service but against the core values of the Swiss people in general,” Odier said. He added that automatic exchange of information with the European Union is not an option for Swiss banks because Switzerland is not an EU member, so the bloc can only demand equivalent measures such as a withholding tax on savings income that is already in place with all EU states.

Many Swiss see foreign attacks on the banks as part of an economic war against a wealthy but relatively powerless small state.

“There is this deep feeling that we are not treated right and the only reason Switzerland is being picked on is because we’re so successful,” said Martin Naville, head of the Swiss-American Chamber of Commerce.

Full article: Special Report: The battle for the Swiss soul (Reuters)

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