The largest bank in Switzerland, UBS, was required by a July 2009 agreement between the Swiss confederation and the United States (at the request of the Department of Justice) to hand over to the Internal Revenue Service the names of 4,450 U.S. taxpayers who had Swiss accounts.  This was unprecedented, given the history of bank secrecy in Switzerland. (For more information, see “Is 2009 the Year That Bank Secrecy Died?” in the January 2010 issue of Trusts & Estates.) In the past few months, predictions included the end of UBS and the end of the "special status" that Swiss banks enjoy, which might even undermine the entire Swiss economy.  The issue of whether UBS would be allowed under Swiss law to disclose the 4,450 names of U.S. bank account holders, who may have been guilty only of “evasion” (not a crime in Switzerland) and not “fraud,” went  to the Swiss Parliament.

The Upper House of the Swiss Parliament had approved the settlement agreement with the United States in 2009.  But after the bilateral agreement was signed, several U.S. account holders complained to the Swiss administrative courts, which ruled that UBS was prohibited by national bank secrecy law from disclosing the names.  Next a committee in Parliament agreed with the courts.  The Lower House of Parliament then met and also agreed, but it then reconsidered and said that the disclosures would be allowed, but that also a full referendum would be required (of all Swiss voters, a very lengthy process, which couldn’t take place until 2011).

The debate in Parliament continued.  In one of the closing statements, amidst emotional arguments, Justice Minister Widmer-Schlumpf warned that rejection of the treaty was likely to trigger fiscal and administrative retaliation measures by Washington.  “I call on you to approve the bill in the interest of the country and of its economy,” she said.

Finally, on June 17 both houses agreed.  UBS could hand over the names and no referendum would be required.  UBS seems to have weathered the disclosure requirements, and reported recent profits.

UBS announced on July 27 that there had been a marked decline in assets being withdrawn by wealthy clients.  On the other hand, reports from Swiss sources say that the voters are “outraged” by this violation of bank secrecy and believe they should have been entitled to a referendum.  Hence, some predict that with the next elections, Swiss bank secrecy may come back in full strength. Stay tuned.