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The first indictment of a Swiss private bank over hiding untaxed money for wealthy Americans has heightened tension among private bankers fearful of being next in the firing line.
The United States has indicted St.Gallen-based Wegelin, the oldest Swiss private bank, on charges it enabled Americans to evade taxes on at least $1.2 billion (758.4 million pound) in offshore bank accounts.
The indictment, which was announced by the U.S. Justice Department on Thursday, set Wegelin rivals in Zurich and Geneva buzzing on Friday, highlighting the fear of another U.S. strike against a private bank.
"It seems the U.S. is shooting at everything in sight and we don't know when it's going to stop. I think the chances of another bank being indicted are pretty big," a Geneva private banker said.
"After all, why should the U.S. stop? Switzerland is small, it's an easy target, but a lot of money can be made out of it. When this whole thing started we didn't know how far the U.S. would go, but now we've found out."
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Switzerland's finance department, foreign ministry, regulator Finma, banking lobby and finance ambassador SIF were silent on the indictment of Wegelin.
Wegelin itself, founded in 1741 and run by loquacious and gregarious private banker Konrad Hummler, also didn't comment.
The threat of imminent U.S. indictment, seen as the kiss of death for businesses, drove Wegelin to sell itself last week.
The indictment is the culmination of months of uncertainty for private bankers, many of whom won't travel to the United States, even for personal reasons, for fear of being arrested.
Several Wegelin rivals chided Hummler for "bringing on the indictment himself" through repeated verbal swipes at U.S. officials as they began cracking down on offshore centres like Switzerland. Unusually outspoken among banking peers who typically prefer to blend in and live and work in relative obscurity, Hummler courted press attention, which he successfully translated into business for Wegelin.
However, he did not fear irking U.S. authorities repeatedly. Justice officials were annoyed by a "farewell, America" letter he wrote to Wegelin clients in 2009, in which Hummler urged clients to sell any U.S. securities they owned given heightened Internal Revenue Service scrutiny of tax dodgers, according to people briefed on the matter.
Hummler's letter was taken by many rivals as a codified invitation for tax evaders to bring their funds to Wegelin as UBS and other banks were sweeping their accounts clean of tax offenders.
PAINFUL STEP
Hummler's "fatal error" was thinking Wegelin was safe from a U.S. indictment because the bank didn't run any U.S.-based branches, several rivals said on Friday.
