Swiss Banks Eye U.S. Investments

The U.S. is used to hatred from abroad. But Switzerland, the land of neutrality, hasn't traditionally expressed too much dislike for Americans. Especially so long as investors made Swiss bankers rich by using their nation as a tax haven to avoid paying taxes on U.S. assets. The U.S. government's recent tangle with Swiss bank UBS may have changed all that. Bloomberg is reporting that at least one major Swiss bank wants nothing to do with U.S. assets.

The Bloomberg article says:

Wegelin & Co., Switzerland's oldest bank, is telling wealthy clients to sell their U.S. assets, or switch banks, because of concerns new rules will saddle investors with tax obligations in the world's biggest economy.


U.S. proposals to extend reporting requirements for banks whose clients buy American stocks and bonds coupled with estate tax liabilities that may be inherited by the heirs of people who have such holdings prompted the advice from the St. Gallen, Switzerland-based bank, said Managing Partner Konrad Hummler.

As mentioned, much of this results from UBS famously agreeing to provide the names of 4,450 potential U.S. tax evaders. It seems that this move has opened Pandora's Box, and Swiss banks are very worried about their privacy. They probably should be. Bloomberg also reports:

Germany and France have also sought to weaken Swiss secrecy laws as they crack down on tax evaders.


The French government, which signed a double-taxation treaty with Switzerland on Aug. 27, obtained the names of 3,000 people suspected of tax fraud and holding accounts at three Swiss banks, French Budget Minister Eric Woerth, said Aug. 30 in an interview with the newspaper Journal du Dimanche.

Though one Swiss banker Bloomberg quotes doubts France's claims:

"It's not credible," Hummler said. "The U.S. had a hard time getting these 4,450 names, then the French come and say we have 3,000? I cannot believe it, but they're trying it on."

The U.S. may have created a new era in Swiss banking. Going forward, U.S. tax evasion through Swiss banking might be more difficult. Unfortunately, U.S. investment may suffer as a result.