Switzerland and UBS are the chief punching bags this week in the global financial crisis.

On Tuesday, France and Germany called for tougher action on offshore banking, with Nicolas Sarkozy intimating that Switzerland should be added to a new OECD blacklist of tax havens. Then on Wednesday, Gordon Brown added his voice to those calls, saying "shadow banking systems" should be abolished.

In Washington, also on Wednesday, pressure increased on UBS to reveal the identity of 52,000 suspected tax evaders, this as the Swiss bank named a new chairman, former Foreign Minister Kasper Villiger.

UBS settled with the US government in February for $780 million and revealed the names of some US clients in a deal that resolved criminal fraud charges. UBS says this is as far as it can go, but it appears unsatisfactory to the Senate hearing.

It is suspected that $15 billion are concealed in the bank accounts of those 52,000 suspects: $15 billion on which tax is owed to the US Treasury.

UBS is making the following distinction: the names it revealed last February were those suspected of fraudulent activity. Swiss law is in line with all major jurisdictions on this matter, therefore it maintains revealing details on these clients was proper.
When it comes to tax evasion, however, as is the case for the clients currently under scrutiny, bank secrecy laws apply.


Between a rock and a hard place

UBS needs to maintain vital business in the US market, so compliance with authorities there is preferable from this point of view. However, Switzerland’s bank secrecy laws are a key element of UBS’s success. Switzerland’s approach to banking attracts deposits from around the world.

SBern fears that should it be forced to amend its laws, rich clients may turn to other countries such as Singapore, a favoured jurisdiction of Asian offshore banking.