Time for change

Switzerland recently encountered its most significant period of economic turmoil, and its lawyers are right on the front line. Although the consequences of the financial backlash were largely kept at bay through government intervention, hitherto unknown banking and investor losses were recorded. Defining the rot was UBS, a bank more known for its conservatism than recklessness in the past. Yet UBS turned out to be the shock victim of the credit crunch, incurring huge net losses and writedowns, owed largely to its exposure to the sub-prime industry.

To counter the worst effects of the crisis, UBS made a series of job cuts and was recapitalised several times over. Zürich law firm Niederer Kraft & Frey (NKF) acted for the Swiss Confederation in November 2008 when it made a CHF6bn capital injection into UBS in the form of mandatory convertible notes, and in August 2009 when the notes were converted. Many were left shocked as to why UBS was so exposed to a market that was not primary for it.

UBS’s problems did not emanate from Switzerland, but were US-driven,’ says Martin Hess, managing partner at Zürich law firm Wenger & Vieli. ‘It should never have entered a market it did not fully understand.

This stuttering of a Swiss institution came at a time when Switzerland’s famous banking secrecy was under relentless fire from the outside world. Recently, Switzerland found itself on the Organisation for Economic Co-operation and Development’s (OECD’s) grey list of countries that had failed to enter into at least 12 tax information exchange agreements (TIEAs), but agreed to revise its tax treaties. Eventually, it made it onto the OECD white list for countries that have substantially implemented the international agreed tax standard. This in itself is a radical change, as these treaty jurisdictions can now request Swiss banks to deliver information on citizens who are suspected of tax evasion and who hold Swiss accounts.

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