Update: parliament votes a second “no” on US & banks law

Credit Suisse headquarters in Zurich's Paradeplatz, Copyright © 1997 - 2009 CREDIT SUISSE GROUP AG

Credit Suisse headquarters in Zurich’s Paradeplatz: the bank is one of 14 under investigation by the American justice department. Banks have told parliament they want the urgent law passed, which would free them up to cooperate with the DOJ

BERN, SWITZERLAND – Late Monday night the economic committee of Switzerland’s upper house of parliament voted 7-6 against an urgent law that would allow Swiss banks under investigation by the US Department of Justiceto share more information with the DOJ. The vote is the second “no” since the Federal Council presented the law 29 May, saying parliament must pass it during the summer  session, in the first three weeks of June.

The lower house refused to debate the law last week, saying it needs more information.

The full Senate is expected to debate the measure later this week. The committee was blocked, 6-6 until its president, Konrad Graber from Lucerne, voted against the measure. The committee carried out two days of hearings that included a number of proposals to modify the law. Its recommendations have now gone to the full Senate. Graber, in a press conference, was careful to note that votes did not necessarily go along party lines.

US-Swiss agreement on banks remains a mystery

The Swiss government (the council) and the US have been tight-lipped about the contents of an agreement resulting from months-long negotiations. The law was drawn up after the US insisted that the Swiss move quickly, council members have told the media and parliament, without providing details. An agreement between the two countries is expected to cover what kind of fines Swiss banks may be handed by the US if they are found guilty of aiding customer fraud.

If the new law is passed, all Swiss banks will have one year to decide if they want to sign with the US programme, which would allow them to share with DOJ investigations client-banker communications.

The banks are under investigation for helping Americans hide money from US tax authorities, in offshore accounts. Under Swiss law the banks cannot directly hand over information to a foreign government; requests for administrative assistance must be made to the government, which then decides case-by-case if the banks can legally provide the data because fraud has most likely been involved.

Former Swiss National Bank chairman Philipp Hildebrand said Monday that the US has given Switzerland 120 days for the banks to act. The information was in an article in the Financial Times.

France says the Swiss are too slow in responding to demands for help

A French member of parliament closely involved in French requests for administrative assistance told RTS (Swiss public broadcasting) Monday that Switzerland has been far too slow to handle requests, and he wants to see the OECD increase pressure on Switzerland to speed up the process. Yann Galut, who is the rapporteur for France’s fiscal laws, reporting on how well they are implemented), says that of 618 overall requests made by France in recent years, only 142 have been treated, of which 40 percent “were satisfying”. He believes the number should be higher, but “the worst are requests that are bank-related only, where we have made 429 requests to Switzerland and only 29 were considered correctly made, and treated”, a very low 6.5 percent success rate, he notes.

At issue is the way in which requests are made, with Switzerland insisting that those under investigation must be notified in many but not all cases. For Galut, this is a problem because the French government wants to investigate some of its citizens possibily illegal overseas banking activities without alerting them first. The Swiss system has also been criticized by the OECD.