Oldest Swiss bank victim of US tax probe
Zurich - Wegelin, Switzerland’s oldest bank, has been forced to sell its non-US business to shield it from the fallout over a row with US authorities, which have threatened to charge it with helping US taxpayers to hide assets.
The St Gallen-based bank is transferring most of its clients and employees - centred on Switzerland - to Notenstein Privatbank, which is being bought by Raiffeisen, the country’s third-largest bank, for an undisclosed price, the banks said.
“One can certainly imagine how difficult this step was for us; we are giving up our life’s work,” Konrad Hummler, one of Wegelin’s eight top managing partners and a leader in Swiss financial circles, said on Friday.
“The monstrously difficult and existence-threatening situation that the dispute with US authorities has put us in, forces me and my partner of several years Otto Bruderer... to this extraordinarily painful course of action,” Hummler said.
Hummler, who built Wegelin up into a bank that has over 20 billion Swiss francs in assets, said he was relieved that Raiffeisen was taking over Wegelin’s clients and employees.
Wegelin, founded in 1741, is the first standalone Swiss bank to sell off its operations in Switzerland as a result of the United States’ efforts to catch clients who used Swiss banks to evade the taxman.
Banks being probed by US authorities are worried that clients, even in their non-US operations, will pull their money out because of the investigations.
Switzerland has been locked in a tax dispute with the United States for years.
But Swiss Finance Minister Eveline Widmer-Schlumpf said progress had been made at the World Economic Forum in Davos towards solving the row with the United States over untaxed money stashed in secret Swiss bank accounts and she is hoping for a deal this year.
Wegelin will remain in charge of US customers, the two banks said.
Reuters has reported that US authorities are moving towards taking legal action against Wegelin that could lead to an indictment on charges the bank enabled wealthy Americans to evade taxes.
An indictment of it would be a blow to a national tradition of banking secrecy that dates back to the Middle Ages.
Three Wegelin employees have been indicted by US prosecutors for selling tax evasion services to well-off Americans. The charges outlined the sales role of senior unnamed partners at the bank.
The US Justice Department is probing 11 Swiss and Swiss-style banks, including Wegelin, suspected of selling offshore tax evasion services to tens of thousands of Americans.
The investigations, growing out of scrutiny of Swiss financial giant UBS are also focused on Credit Suisse and Basler Kantonalbank, among others.
The new private bank, Notenstein Privatbank, will be headed by Adrian Kuenzi, who was until now the chief of Wegelin’s west Switzerland business. It will be run as an independent unit within the Raiffeisen Group.
The global attack on Swiss banking secrecy, fuelled by cash-strapped governments seeking to crack down on tax evaders, has been painful for smaller Swiss private banks.
Rich foreigners have started pulling funds from secret accounts in Zurich and Geneva, prompting big players to gobble up smaller rivals and undermining the personal touch that is the pride of Swiss private bankers.
The deal, which will give Swiss cooperative bank Raiffeisen a foothold in the business of wealth management, will secure 700 jobs in Switzerland, Raiffeisen said.
Raiffeisen, which specialises in mortgage lending, is looking to build up its presence in wealth and asset management. It missed out last year in buying Swiss private bank Sarasin after Dutch cooperative Rabobank agreed to sell its majority stake in Sarasin to Safra.