UBS AG’s (NYSE:UBS) problems related to helping clients dodge taxes still drags on. Almost five years after Switzerland’s biggest bank by assets reached a settlement worth $780 million by U.S regulators, the troubles persist.
Recently, a German daily reported that the Swiss bank might have to shell out roughly €200 million ($274.8 million) to the German government for similar charges. However, the sum is less than €300 million that the government originally demanded.
The latest fiasco comes just a day after another Swiss bank, Credit Suisse Group AG (CS) will reportedly be sued by the U.S. Senate committee for facilitating tax evasion by American clients.
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Tax Evasion: A Nuisance for Swiss Banks?
Tax evasion charges on major Swiss Banks is turning to be a burden for banking giants like UBS AG and Credit Suisse. Switzerland’s rules on banking secrecy, which shielded client information of clients, gave an added boost to customers who wanted to escape stringent tax rates in their home countries. Notably, the German tax authorities have been investigating wealthy Germans who had hoarded money in accounts in Switzerland’s biggest banks to evade taxes in their home country.
These probes resulted in Credit Suisse and Julius Baer Group Ltd. settling charges of facilitating tax evasion in 2011 by paying €150 million and €50 million, respectively. Later, in Aug 2012, German tax investigators found alarming evidence against UBS AG, in which the bank’s employees are found to be giving directives on how German patrons can invest their money to minimize tax payment.
Further, in mid-2013, German investigators searched UBS AG’s offices as part of a probe subsequent to the German state, North Rhine-Westphalia’s purchase of a certificate of deposit with information about UBS AG’s wealthy German patrons. German regulators are hot on the heels of UBS Deutschland AG, and its parent company as well as some of the bank’s staff related to the abetting of tax evasion.
Although UBS AG’s efforts to settle tax evasion issues are commendable, we hold that stringent norms and a sluggishly recovering economy will be an overhang on its financials in the upcoming quarters.
UBS AG currently carries a Zacks Rank #3 (Hold). Some better-ranked foreign banks include Mitsubishi UFJ Financial Group, Inc. (MTU) and The Royal Bank of Scotland Group plc (RBS), both of which has a Zacks Rank #2 (Buy).