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Swiss bank shares drop after 'Lex USA' rejection

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Swiss bank shares drop after 'Lex USA' rejection
Stock exchange building in Zurich. Photo: Wikimedia Commons
15:38 CEST+02:00
Share prices in Swiss banks plummeted Thursday, a day after lawmakers in Bern rejected a deal with Washington to halt potentially ruinous US legal action against banks suspected of stashing cash for US tax dodgers.

In midday trading, Switzerland's largest bank, UBS, saw its stock fall 1.81 percent, while the shares of its largest competitor, Credit Suisse, slumped 3.63 percent.
   
Other banks also nosedived below the Swiss stock exchange's main index average of down 1.59 percent, including private bank Julius Baer, which fell 1.93 percent, and the Basel Cantonal Bank (BKB), which shed 4.19 percent.

Thursday's fall in banking stocks was also a continuation of a month-long trend that kicked off when the Swiss government announced Washington's take-it-or-leave-it deal, dubbed "Lex USA".

That deal would have temporarily lifted Switzerland's long-sacrosanct banking secrecy and allowed banks to settle with US authorities and draw a line under past wrongdoing.
   
Most of the conditions had been kept secret at the request of Washington, but it was expected to include massive fines for the banks found complicit in helping American citizens dodge US taxes.
   
Swiss banks are believed to hold billions of dollars belonging to American citizens who have not declared these assets to US tax authorities.
   
The battle began in 2009 after UBS was fined in the United States for complicity in tax evasion -- an issue in sharp focus amid the financial crisis.
   
Fourteen other Swiss banks ended up in US sights for grabbing former UBS clients, including Julius Baer, Credit Suisse and BKB.
   
Currently, US investigators have to make formal requests for legal assistance concerning specific tax-dodgers, a procedure Washington sees as cumbersome.
   
Lex USA would have put in place a one-year waiver of Swiss banking secrecy law, enabling the banks to hand over information on accounts held by US citizens, as well as on bank employees and others who assisted them.
   
Without it however, the banks risk falling afoul of Swiss law if they hand over client information, or risk their American and global operations if they do not.
   
"Another solution must be found now that Lex USA has been buried," the analyst said.
   
The head of the Swiss Bankers Association, Patrick Odier, who had given his whole-hearted support to the deal, told the Tribune de Geneve daily Thursday there was still a way out for the banks if Bern provided them with individual permission to cooperate with US authorities to reveal past indiscretions.
   
As for cooperation on future cases, the Swiss parliament is currently examining a deal to simplify Swiss implementation of the US Foreign Account Tax Compliance Act (FATCA), which requires the world's banks to report holdings by Americans.
   
The United States plans to phase FATCA in from January 1st, 2014.

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