Julius Baer bank reaches deal in principle with US

A formal settlement with the US justice authorities is expected in the next three months Keystone

Swiss private bank Julius Baer says it has reached a preliminary accord with the United States authorities to settle an investigation into allegations it helped wealthy American clients evade taxes.

The country’s third largest listed bank on Wednesday said it set aside nearly $200 million (SFr198 million) in additional provisions for the settlement, bringing the total amount earmarked for potential penalties to $547.25 million, which the bank will charge to its 2015 full-year results.

Julius Baer’s penalties potentially look much lighter than expected and are below those paid by larger rival Credit Suisse, which in 2014 was fined $2.5 billion for helping Americans evade taxes and pleaded guilty to a US criminal charge.

US authorities have conducted criminal investigations of several Swiss banks after the leading UBS agreed in 2009 to pay $780 million and identify certain US clients to resolve criminal charges that it helped Americans evade taxes.

Approval expected

Julius Baer’s deal with the US Attorney’s Office for the Southern District of New York, which conducted the investigation, remains subject to approval by the US department of justice (DOJ), Baer said in a statementExternal link.

Zurich-based Baer said it hoped to settle the justice department investigation, which began in 2011, in the first three months of next year‎.

The bank said it still expected to report a net profit for the current financial year and would remain adequately capitalised.

If confirmed Julius Baer would have to stomp up the third largest fine paid by a Swiss bank in a settlement with Washington.

Ending uncertainty

Resolving the US tax case would ‎end the uncertainty over potential fines for the bank. Analysts told the Swiss News Agency that Julius Baer would have enough capital to shoulder the fine.

“The exactness of the additional provisions suggests that the agreement with New York authorities is just a formality, while the DOJ fine could still change,” Zürcher Kantonalbank analysts told Reuters news agency.

It is also not clear whether Baer will need to follow Credit Suisse and Wegelin in pleading guilty to criminal charges.

Wegelin, Switzerland’s oldest private bank shut its doors permanently in 2013 after over two and half centuries in business following its agreement to plead guilty to US authorities.

Washington is also running a separate voluntary programme to allow Swiss banks to resolve potential criminal charges by disclosing cross-border activities that helped US account holders conceal assets.

At least five other major banks are awaiting a settlement with the US authorities. So far, about 75 Swiss banks have paid fines totaling $1.02 billion.