S&P Downgrades Swiss Lender Over US Tax Investigation
08 August 2013
Posted by: Author: James Shotter
Author: James Shotter (FinancialTimes)
One of Switzerland’s cantonal banks caught up in a US probe into alleged tax evasion has been downgraded by the rating agency, Standard & Poor’s.
S&P said that it was cutting Basler Kantonalbank’s senior unsecured debt rating one notch to AA from AA+ because of the "elevated reputational and legal risk” surrounding the bank due to the long-running US investigation into the alleged role of at least 12 Swiss banks in helping rich Americans dodge taxes.
"If, when, and how much of a prosecution fine BKB might need to pay as legal compensation is uncertain,” S&P said. "As a precaution, we have factored into our assessments a material one-time legal cost for BKB, but believe that BKB’s earnings would offset such a cost.”
S&P also cited BKB’s involvement in a fraud case last year, for which it has made provisions worth SFr50m ($54m), in its decision to downgrade the Swiss lender.
A spokesman for BKB said that the bank noted S&P’s decision, and that it was working closely with US authorities to bring about a resolution of the tax investigation, adding that BKB’s capital position was "comfortable” and should allow it to cover a possible settlement.
So far the US has extracted fines from two Swiss banks, and one in Liechtenstein. In 2009, UBS, Switzerland’s largest bank, paid $780m to settle allegations that it had helped American citizens dodge taxes, while earlier this year Wegelin, Switzerland’s oldest private bank, was forced to close after admitting a similar charge. Last week Liechtensteinische Landesbank also settled with the US.
S&P said that the ratings of the other banks involved in the US probe were affirmed as of Tuesday.
Shares in BKB closed up 0.38 per cent at SFr79.60 in a rising market in Zürich.