Switzerland's upper house of parliament approved the handover of account details on as many as 4,450 UBS AG clients to settle a lawsuit that threatened the Swiss lender's American business.
The settlement was approved by 31 votes to 12 in Bern today. Lawmakers rejected a proposal to give voters a chance to force a nationwide ballot on the agreement, paving the way for the measure to take effect in August. The settlement will be discussed in the lower house as soon as June 7. The Swiss government was forced to turn to parliament for approval after the Federal Administrative Court ruled in January that the deal wasn't fully enforceable because it defined tax fraud too broadly. While a rejection would have hurt the Zurich-based bank's U.S. operations, some lawmakers had tied their approval to tougher restrictions on lenders' risk taking.
"The fact is that if UBS has a problem, Switzerland has a problem too," said Simonetta Sommaruga, a Social Democratic lawmaker in the upper house during the debate. "That's why we have to help out UBS with this settlement. A rejection would cause considerable damage" to the economy.
Switzerland agreed to pass on the account details after the U.S. sued UBS for information on as many as 52,000 clients. While Swiss law permits the government to breach banking secrecy in cases of tax fraud, tax evasion is considered a civil matter.
The failure of U.S. citizens to complete certain tax forms or declare income is tax evasion under Swiss law, the court ruled in a decision published in January. Tax attorneys said at the time that the ruling could prompt the U.S. to revive its lawsuit against UBS.
"UBS helped thousands of rich American citizens to systematically ignore their tax obligations," Justice Minister Eveline Widmer-Schlumpf said in the debate. "We're in no way trying to extricate UBS from this mess. We're just avoiding damage to the economy."
Lawmakers rejected a government timetable for the discussion of measures to limit risk-taking by Switzerland's big banks and possibly break them up in case of a financial crisis, as well as tax changes on bonus payments, saying the plan shouldn't be linked to the UBS tax case.
The vote, by 24 to 18, means the regulatory proposals for lenders deemed vital to the economy will now be discussed by the lower house, possibly delaying the government's plans to have new legislation in force by 2012.
Approval of the timetable would have shown a "joint commitment to tackle the issue right away," Widmer-Schlumpf said before the vote. Swiss regulators have already forced large banks to raise their capital buffers after a government-led bailout of UBS in 2008.