Second Swiss bank closes over US tax pressure

GENEVA (AFP) - A second Swiss bank has decided to close its doors as the United States cranks up pressure on financial institutions for abetting tax evasion.

Zurich-based Bank Frey & Co., which manages about two billion Swiss francs (S$2.75 billion), said late on Thursday its shareholders had decided to halt operations.

"The decision stems from the increasingly difficult market conditions, ever-growing regulations and the unsustainable requirements that smaller private banks are required to comply with, in part as a result of the tax dispute with the USA," it said in a statement.

Bank Frey is one of the 14 Swiss banks under investigation by the US Justice Department for aiding US taxpayers in avoiding taxes, and as such is ineligible for simplified procedures offered by Washington to settle such accusations.

The bank said it had acted cooperatively within the framework of both Swiss and United States law and intends to continue to do so.

A failure to reach a settlement could lead to prosecution as well as being barred from the US financial system, which has pushed Swiss banks to comply.

Bank Frey said it is financially healthy and will not be liquidated.

It is the second Swiss bank to shut after running into trouble with US authorities.

In January, the private bank Wegelin & Co. closed after pleading guilty to US tax evasion charges and paying US$74 million (S$91.8 million) in fines.

US pressure has pushed Switzerland to roll back the banking secrecy that made the country a leader in catering to the world's rich.

It has agreed to automatic reporting of bank account information on US citizens to Washington and has signed up to an international convention on assisting tax evasion investigations.

Another bank caught up in the US dragnet, the Swiss subsidiary of Liechtenstein's Liechtensteinische Landesbank (LLB), is also expected to close its operations by the end of the year and is to pay US$23.8 million to avoid prosecution.