Switzerland and the United States are set to hammer out the details of an agreement in principle reached between the Swiss bank UBS AG and the Internal Revenue Service to end a messy legal spat.
After lawyers for UBS and the IRS said a deal had been reached, the Swiss justice department said Friday that the two governments would spend this week ironing out the details to settle the matter definitively out of court.
The outline of a deal, lauded by Switzerland's regulator, caused a surge in UBS shares.
The United States is seeking UBS clients' names as part of a stepped-up IRS campaign against wealthy tax scofflaws who hide their money offshore.
Even before its details are made public, the settlement gives UBS a badly needed boost after it has struggled for months with massive outflows of funds as the United States pursued alleged tax dodgers with Swiss accounts.
"This is an issue that's been hanging over UBS for a long time, and resolution is a necessary step to UBS' recovery," said Matt Clark, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc.
A spokesman for the Swiss financial regulator also welcomed the proposed deal, which comes six months after UBS settled criminal proceedings with the U.S. Department of Justice through deferred prosecution. As part of the deal, UBS agreed to pay a $780 million fine and hand over roughly 250 sets of client data, a move ordered by Switzerland's bank regulator after evidence of wrongdoing emerged.
Though analysts applauded the deal, which was reached with a federal court in Miami set to begin hearing the case today, they also said that much depends on the final terms, which are to be announced Aug. 7.
Because the two governments have ordered the two parties to keep mum until the details are released, UBS is unlikely to comment if pushed by analysts for specifics Tuesday, when it reports second-quarter results. In a statement, UBS said it would not comment while remaining issues are worked through.
The U.S. pursuit of UBS is generally seen as a warning shot to other banks with U.S. offshore clients or that offer financial services outside the country to wealthy U.S. citizens. Pressure on money management centers such as Switzerland is expected to remain intense, for example, from the European Union.
The suit against UBS can already be deemed a public success for the IRS, which has shaken out scores of U.S. citizens who want to come clean on their tax bills.
The IRS is offering a disclosure program until Sept. 23, which gives Americans the chance to face only civil charges, which can carry lower penalties than criminal charges, if they volunteer details of tax evasion.
