SWISS SIZE UP DAMAGE TO ITS BANKING SECRECY REPUTATION

       Decision to bow to US pressure a 'catastrophe' for financial centre
       For more than 60 years, the swiss have nurtured banking secrecy to the extent that it has become an unshakeable part of Switzerland's image like chocolate, watches, cowbells and Heidi.
       But many bankers, lawyers and analysts in the country believe a deal struck with the United States to relieve pressure on the flagship bank, UBS, has slown a hole in the wall of secrecy, even if it remains enshrined in Swiss law.
       "The UBS disaster is a catastrophe for the Swiss financial centre because everyone will rush for the breach," said Patrick Segal, director of Edmond de Rothschild Private Bank.
       Unlike most major economies, banking secrecy grants account holders in Switzerland complete privacy, keeping their banking details out of bounds for any authority, even the Swiss taxman.
       It can only be lifted for legally sanctioned investigations into criminal offences, and that, under local law, rules out the lesser offence of tax evasion.
       Last Wednesday, the Swiss and US government to end a lawsuit against financially-troubled UBS over charges that its bankers used Swiss secrecy to help US taxpayers fraudulently evade taxes.
       It included an arrangement to disclose details on an unprecedented number of UBS accounts, 4,450, through an established process to deal with tax fraud, which is regarded as a crime in Switzerland.
       But the scope was tantamount to a "fishing expedition" that used to be frowned upon in the Swiss rulebook, setting a new precedent, experts warned.
       "Nobody can see legally how this treaty wouldn't apply to other banks," said lawyer Enrico Monfrini, who helped Nigeria recover hundreds of millions of dollars hoarded abroad by late dictator Sani Abacha.
       Above all, it contained wording that blurred the distinction with tax evasion, where banking secrecy had been regarded as absolute in the past.
       Manuel Ammann, director of the Universithy of St Gallen's Institute of Banking and Finance, said that concession amounted to an "official" announcement of the relaxation of secrecy. "In that respect banking secrecy has been weakened in Switzerland", he said.
       UBS chairman Kaspar Villiger said in a newspaper interview yesterday that he could not rule out that some staff at the Swiss bank might have assisted tax fraud in other countries.
       "With 70,000 employees I cannot put my hand in the fire and say there will be no more problems," he told the Swiss newspaper NZZ am Sonntag after being asked about the possibility.
       The financial world is now focusing on dual taxation deals that will be signed over the coming weeks to fall into line with international standards on exchanging tax information, especially those with the biggest foes of secrecy: Britain, France, Germany and the United States.
       "I think the future of Swiss banking secrecy will depend very much on the content of those treaties and the practice of delivering those treaties," said Ammann.