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Updated 18:30

Washington, DC, USA (GenevaLunch) - "UBS will no longer provide offshore banking and securities services to US residents through its bank branches," Mark Branson told a US Senate subcommittee Thursday. Branson is chief financial officer for global wealth management and business banking for UBS, Switzerland’s largest bank. The subcommittee is holding hearings entitled "Tax Haven Banks and US Tax Compliance." The banks’ decision affects primarily non-US citizens, resident in the US, who are UBS Switzerland clients.

The decision was in fact taken in November 2007, Swiss public television TSR confirmed with UBS spokesperson Serge Steiner Friday. Branson’s declaration Thursday in Washington provoked surprise, much of it seeminlgly based on misunderstandings about how UBS works with its wealthy clients. The bank pointed out in its Friday morning press release about Branson’s testimony that it remains legal for the bank to provide wealth management services to US-based clients under the Qualified Intermediary agreement between the US and Switzerland. But, Steiner told TSR, "In any event, it’s becoming complicated and difficult," thus the commercial decision last year to close this part of the business. The US wealth management business represents an estimated CHF20 billion of the total CHF1,800b in wealthy clients’ assets managed by the bank.

International media interpretation of Branson’s statements has been mixed. US Senator Barack Obama, running for president, issued a statement Thursday evening applauding the hearings and asking the Senate to pass the Stop Tax Haven Abuse Act that he helped introduce, and to which the hearing and a Senate investigators’ report, published Thursday, is linked.

Branson’s statement comes in the wake of accusations by the US Internal
Revenue Service (IRS) that it has lost $100 billion a year in tax
revenues due to offshore banking abuse. The Senate investigators’ report claims that UBS has
had 19,000 offshore accounts that were not declared, with a value of
$18 billion.

Branson was the only witness not to have a lawyer with him, noted Le Temps, which has to date shown little sympathy for the US process, and he provided testimony, while some other witnesses, including Martin Liechti, senior UBS banker and a Swiss citizen, refused to speak on grounds of possible self-incrimination. Liechti has been held in the US since May. Both Le Temps and the International Herald Tribune pointed out that after Branson’s testimony, Senator Carl Levin, a harsh critic of UBS, said he was pleased. "Levin commended UBS for changing its business practices. ‘We can’t
reach all the banks,’ he said. ‘We have reached yours. That represents progress.’"

Branson’s statement does not close the door on US residents banking with UBS, but they must in future do so "through companies licensed in the United States," he noted. His remarks have no impact on US citizens who are not US residents: Americans residen in Switzerland, for example.

Carl Levin, the Democratic Party sub-committee chairperson, is taking a strong stance and Thursday suggested to ABC television, a US network, that if a bank ""goes to the extent that UBS has gone through to avoid doing what their
agreements with the US require" it should perhaps not be allowed to do business in the United States. He was reported by the Inter

Branson noted in his testimony that the bank’s internal investigations are not completed but it appears clear that "our controls and supervision were inadequate. UBS is committed to taking both corrective and disciplinary measures."

Mark Branson_subcommittee statement.pdf

Reports, reactions:
Le Temps (Fre), Geneva
Financial Times, London
International Herald Tribune, Paris
NZZ (Ger), Zurich, UBS apology, NZZ
Wall St Journal, New York (comments page)