Wegelin & Co, one of Switzerland’s oldest pure private banks, said it had taken the radical step "as a consequence of the increasingly threatening situation surrounding Wegelin & Co Private Bankers in the US tax dispute".
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Earlier this month, Wegelin’s three bankers were charged with conspiring to help US clients hide more than US$1.2 billion from American tax authorities.
As per the agreement, a majority of Wegelin’s clients, staff and assets of CHF21 billion will be transferred to a company called Notenstein Private Bank, an entity set up specifically for the purpose. That in turn will become a 100% subsidiary of Raiffeisen.
However, Wegelin said the company will remain in existence to finalize the closure of all remaining US client relationships and to continue negotiations with the American justice authorities.
The sale reflects the severity of the crisis and the enormous pressure on Swiss banks. Wegelin transaction could serve as a blueprint for other smaller facing legal threats in the US.
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By GlobalDataCurrently, several Swiss banks including Credit Suisse, Julius Baer and Basler Kantonalbank, face legal challenges in the US over claims the banks helped US clients evade taxes. In 2009, UBS had to pay US$780 million to settle criminal charges and turned over the names of 4,500 clients.
Last year, Switzerland signed tax accords with Britain and Germany that would allow their citizens to pay tax on secret accounts without revealing their identities.
We expect a similar tax deal to be signed between the two countries by end of this year, which will bring much needed stability in turbulent Swiss private banking industry.
Recently, Swiss Finance Minister Eveline Widmer-Schlumpf after meeting US Treasury Secretary Timothy Geithner at the World Economic Forum in Davos, said that tax discussions between Switzerland and the US could be concluded by the end of this year.
For Raiffeisen, which has been looking for acquisitions and made an unsuccessful bid for private bank Sarasin last year, the move will help it to broaden its footprint outside its main retail market and establish itself as a major player in Swiss wealth management industry.
