The Swiss banking industry as a whole has put the US tax dispute behind it. But for some institutions like ZKB, Credit Suisse and Pictet, the issue still lingers. 

The recent headline «Zuercher Kantonalbank puts US tax dispute behind it» made people sit up and take notice. But didn’t the state-owned bank already do this in 2018? Not quite.

Threatened with criminal charges, ZKB reached a settlement with the U.S. Department of Justice (DoJ), which at the time included a fine as well as a probationary period of several years. It has now completed its probation.

The question is why the bank only released provisions in the 2021 financial year? Companies are only allowed to set aside funds if an impending liability is probable and the amount remains uncertain. Because it wanted to pass its probationary period and avoid future fines, shouldn't the bank have released the provisions earlier?

Expensive lawyers

Responding to an inquiry from finews.ch, ZKB confirmed that not all provisions in the US tax dispute were released in 2018. The bank continued to set aside funds for future data processing, legal clarifications and continued dialogue with the DoJ, it said.

Because the comprehensive cooperation obligations ended with the conclusion of the probationary period, the funds totaling 19 million Swiss francs could be released to the income statement. 

Secrecy about damages

ZKB declined to reveal what the total provisions for the US tax dispute have been, nor is it apparent in the 2018 annual financial statements. While two footnotes refer to each other, they provide no concrete information as to the movements in the items relating to the dispute. 

Are there generally still large reserves lying dormant at Swiss banks from the whole affair? This is probably unlikely on a large scale. It is likely that what remains are funds that may have been set aside for the administration of the probationary period. 

No Wrongdoing

Some institutions are resisting reaching a settlement. One of those is Geneva-based private bank Pictet which has yet to reach an agreement with the Americans. The bank assumes it has always acted correctly in the transactions and, accordingly, has not made any provisions for a possible fine, as a media spokesman confirmed to finews.ch.

Tax Dispute Reloaded?

Recently there have been increasing reports that the DoJ wants to take another look at old cases in the dispute, such as that of Credit Suisse, as finews.ch reported. This raises the question of whether CS, which had paid the highest fine of $2.6 billion to the U.S. in the tax dispute, has further provisions for the case.

However, nothing is mentioned in this regard in the latest annual report. The bank declined comment to finews.ch, on any provisions related to the U.S. tax dispute. According to the fourth quarter 2021 media briefing, however, CS made provisions for litigation costs to the tune of 1.1 billion Swiss francs for 2021 alone.

According to estimates, around 100 Swiss banks paid around $7.5 billion dollars in the dispute.