Zurich: Swiss bank UBS was braced on Friday for a high-stakes trial in the United States next week that could force it to reveal secret client data, as a last-minute deal remained elusive.
It was unclear whether UBS, one of the world’s largest wealth managers, could reach a settlement to the damaging tax row before a court hearing starts, weighing on its shares.
The hearing is due to begin in Miami on Monday.
“Finding a solution to the matter may take longer than just the next few days, although one can never rule out a last-minute deal,” a source familiar with the matter told Reuters when asked about the chances of a deal this weekend.
US authorities have asked UBS to disclose the identity of 52,000 US holders of secret Swiss accounts.
But UBS chief executive Oswald Gruebel told executives in an internal memo this week that the bank could not comply with the request because it would be in breach of Swiss criminal law.
Switzerland has vowed to prevent UBS from handing over client information to US authorities, in an attempt to defend bank secrecy, and says the tax case targeting its biggest bank is souring diplomatic ties.
A UBS spokesman said the bank would be open to a solution stemming from talks between the Swiss and US governments. But he declined to say whether a deal was in sight.
“The enforcement of the summons would require UBS to violate Swiss law. We have also stated that issues relating to the exchange of information in tax matters should be discussed and resolved between friendly governments,” he said.
Analysts say failure to resolve the tax row ahead of the court hearing in Miami would hurt UBS.
“It is impossible to predict the outcome. We are telling clients to be cautious,” Dirk Becker, a bank analyst at Kepler Equities. “I am sure talks are happening right now. If the trial starts, this would be a bad sign for UBS.”
On Wednesday, US district judge Alan Gold, set to preside over next week’s hearing, gave the Justice Department until noon on Sunday to say whether it is prepared to seize UBS assets in its bid to force it to disclose data, raising hopes that a settlement was in sight.
Shares in UBS were 2.2% lower at 12.66 Swiss francs against a 0.9% fall in the DJ Stoxx European Banking index.
Focus on data, not money
UBS chairman Kaspar Villiger told Swiss television earlier this week that the focus of the tax dispute was access to the information related to US clients of UBS. “This is not about a payment, it is about data,” Villiger said.
He also said that speculation of UBS having to pay billions of dollars in the tax dispute were completely unfounded.
Swiss media have said UBS risked having to pay 3 billion to 5 billion Swiss francs ($2.8 billion-$4.6 billion) to end the litigation.
“It’s certainly not about such sums,” Villiger said, without qualifying his comment any further.
He noted that the row concerns a civil summons and that UBS already paid for its mistakes when it agreed to pay $780 million to end an earlier criminal lawsuit in February. The bank disclosed around 250 client names on that occasion.
A separate source familiar with the situation said it was unlikely that any payment involved in the UBS civil summons would be above $1 billion.
“To charge them another 3 to 5 billion francs at a time when they (UBS) are facing an uncertain economic environment and are working on fixing their capital structure would be irresponsible,” the source said.
Switzerland, the world’s biggest offshore banking centre, has said it will seize client data to stop UBS from handing it over to the Internal Revenue Service (IRS) to defend bank secrecy laws, saying the case is souring diplomatic ties.
But Swiss National bank chairman Jean-Pierre Roth said he expected a deal in the lawsuit against the country’s former flagship bank UBS in the United States.
“We have no doubt that this bilateral fight will be resolved,” Roth told the German daily Handelsblatt according to a version of the interview on the paper’s website.