Swiss parliament rejects bill on bank disclosures

Swiss parliament rejected a bill that sought to resolve a dispute over undeclared bank accounts held by US citizens, in a development that could lead to prosecution of the country's banks by US authorities.

Members of Swiss parliament's lower house voted 123 to 63 against the bill, which would have allowed Swiss banks to cooperate with the US in a bid to clear a long-running dispute over wealthy American tax evaders.

According to the government it had no plan B, in the event of the bill failing to pass.

Switzerland wants to prevent the indictment of another of the country's banks, Wegelin & Co which in January pleaded guilty to helping US taxpayers hide assets from the Internal Revenue Service (See: Oldest Swiss bank to close after guilty plea in tax evasion case). The bank had taken over clients from UBS AG, which avoided prosecution in 2009 by admitting to helping tax evasion, paying $780 million and handing over client names.

According to  Peter V Kunz,  professor of comparative law at the University of Bern, he did not think the Americans would really start a wave of indictments, such a horror scenario was not likely. He did however, think the one or other banker could face charges, but none knew really. He added, the legal risks and the legal uncertainties would remain for the Swiss financial sector, and how it all ended  was totally up in the air.

With the vote, the measure ends up back with the upper house, which had approved it last week, for further debate as also another vote as early as Wednesday. A reversal there would put an end to the legislation leading to severe legal complications for Swiss banks in US courts. Approval would see it back in the lower house.

The plan had been introduced last month by the Swiss cabinet evens as critics said it amounted to a violation of Swiss sovereignty.

Lawmakers raised concerns over it unfairly exposing local advisers and attorneys to legal prosecution in the US. According to the Swiss Bankers Association, an industry lobby, it lacked important details on the potential size of fines for the banks that agreed to participate.

According to a spokesman for the Swiss Department of Finance, enough time remained for the measure to be passed before parliament's current session ended Friday. The autumn session would begin on 9 September.