Banks leaving Switzerland as the end of secrecy hurts tax dodgers

For European lenders with private-banking aspirations, a presence in Switzerland used to be a must. Now, with bank secrecy eroding and rising compliance costs chipping away at profits, more are saying adieu.

The number of foreign-owned Swiss banks fell to 129 by the end of May from 145 at the start of 2012, according to data from the Association of Foreign Banks in Switzerland. Assets under management slid by a quarter to $921 billion in the five years through 2012 as clients withdrew money or paid taxes on undeclared accounts…

…While Switzerland remains the biggest center for global offshore wealth with $2.2 trillion or about 26 percent of the market…departures may further chip away at the Alpine republic’s status.

“There will be a bit of a shakeout among private banks,” said Felix Wenger…co-head of the private-banking practice at consulting firm McKinsey & Co…“Specifically for Switzerland, some foreign players might conclude that an exit is a better option…”

The U.S. has been investigating Swiss banks and units of foreign banks in the country, including that of London-based HSBC, after UBS AG (UBSN) in 2009 avoided prosecution by admitting it fostered tax evasion and delivering data on about 4,700 accounts of Americans. France and Germany have been searching for tax dodgers using data stolen from Swiss banks and also sharing some of the information with authorities in other European countries.

Agreements with the U.K. and Austria to collect taxes on behalf of those countries on accounts held in Switzerland have been in force since January, and Switzerland is in talks with other European countries on taxing secret accounts. The country will join the international push against tax dodgers and help develop global standards allowing banks to share customers’ details to combat tax evasion, Finance Minister Eveline Widmer-Schlumpf said in June…

Everyone is so nice and polite. Fact is we’re discussing corruption and theft, money owed to any number of nations. Looks like Mitt Romney will have to move a couple of chairs over to make room in the Cayman Islands for more of his cheapskate buddies to move in from Switzerland.

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