The Swiss parliament has finally backed a treaty to give the U.S. government details of clients UBS AG helped dodge taxes, ending nearly a year of uncertainty that threatened the Swiss bank's recovery.
The two houses of parliament agreed not to hold a referendum on the treaty after crisis talks on Thursday, so Swiss tax authorities should be able to hand over on time the details of the 4,450 clients, lifting the veil on Switzerland's cherished tradition of banking secrecy.
Berne and Washington cut the deal last August to end a damaging lawsuit against UBS, Switzerland's biggest bank. But UBS' wealthy clients continued to leave in droves as the threat of further legal action loomed if Switzerland failed to deliver on its promises within a year.
UBS is finally off the hook and will regain ground in its wealth management business, said Sarasin analyst Rainer Skierka.
Thursday's vote will bolster UBS Chief Executive Oswald Gruebel's attempts to steer the world's second-biggest wealth manager to recovery after a government bailout in the financial crisis.
Client cash could stop gushing from UBS by the end of 2010, turnaround specialist Gruebel assured investors last month, as the bank booked its biggest quarterly profit since he took charge.
The timetable for a referendum would have prevented the handover of the client accounts on time, breaking the terms of the tax treaty and risking U.S. retaliation that would have shaken clients' confidence further.
Parliamentary approval means that nothing now stands in the way of UBS client details being disclosed, the Swiss Justice Ministry said.
Swiss tax administrators were on course to deliver the details on time, the Swiss Foreign Ministry said, adding 500 UBS client names had already been disclosed to the United States with the clients' agreement.
Following the parliamentary decision, details of approximately 1,200 cases can be disclosed to the U.S., the Foreign Ministry said, signaling that 1,800 decisions could soon follow. Almost all of the remaining cases -- roughly 1,450 -- are already being processed, so efforts to comply with the treaty assistance request are on course.
The U.S. tax commissioner praised the action. U.S. authorities had been talking tough, threatening to go back to court to get UBS to comply if the August deadline was missed.
We will immediately follow up on the information we receive from the Swiss, IRS Commissioner Doug Shulman said in a statement.
UBS paid a fine of $780 million and gave Washington the names of 250 to 300 U.S. clients as part of a deal to settle a criminal lawsuit last year. The U.S. government has been pursuing criminal cases against some of those individuals.
UBS shares closed up 1.35 percent in Zurich.
RELIEF FOR SWISS BUSINESS
UBS welcomed Swiss parliamentarians' decision to back the deal.
It (the approval) means that our clients will trust us more, that they will be less worried about actions people have speculated about in recent days and weeks, UBS Chief Executive Oswald Gruebel told Swiss TV channel SF1.
I don't think that there will be an immediate change in the bank business, he said.
UBS had given the data to Swiss tax authorities for processing, but a court in January prevented them from passing on the data, forcing the government to bypass the ruling with a legal patch that required parliamentary approval by both houses.
Switzerland's largest party, the right-wing Swiss People's Party (SVP), shifted position at the 11th hour, allowing the lower house to back the deal without the referendum it had urged.
Approval of the tax treaty without the uncertainties posed by a popular vote was the best outcome for UBS and Switzerland, said Bob Ray of New York law firm Pryor Cashman.
Uncertainty in any market is the worst possible scenario, said Ray, a former assistant federal prosecutor.
Parliamentarians' backing of the treaty sent an important signal and prevented the restart of a legal battle that could have damaged the wider Swiss economy, business lobby group economiesuisse said.
Swiss business thanks parliament for the decision, which is in the interests of the whole nation and its economy, said economiesuisse President Gerold Buehrer.
(Additional reporting by Kim Dixon in Washington; Editing by Sam Cage, Will Waterman and John Wallace)