UBS chief apologises for bank's role in tax evasion

The chairman of UBS yesterday apologised on behalf of the Swiss banking giant for its role in helping some US clients to evade taxes, an act which sparked lawsuits from US tax authorities.

"I am aware that UBS triggered this problem itself and we are deeply sorry," Kaspar Villiger, chairman of the bank, told thousands of shareholders gathered in the northern Swiss city of Basel for the bank's annual general meeting.

UBS, the US and Swiss governments last August reached an agreement that requires the bank to reveal the identities of 4,450 American account holders suspected of having evaded US taxes.

In return, US authorities are prepared to drop their lawsuit against the bank. However, this deal now hangs in the balance, as it is pending approval from the Swiss Parliament.

Mr Villiger urged Parliament to approve the deal, saying that a failure of the accord "would damage Switzerland's credibility abroad and could dramatically impact economic relations with the US".

A long queue of shareholders who have signed up to speak during the meeting are meanwhile expected to challenge the bank on another issue: its plan to absolve former executives from blame for its recent woes. Just hours before the meeting, a parliamentary commission urged shareholders to reject a proposal by the bank to discharge former executives of the bank, thereby exempting them from possible lawsuits.

Mr Villiger defended the proposal, telling shareholders that none of "nearly 10 internal and external investigations have brought forth evidence" to pose legal challenges against individual executives.

He also noted that in certain cases, bringing legal charges may not be in the interest of the company or shareholders.

"Experience shows that such trials last a minimum of 10 years, cost millions of francs, keep a company in the headlines for years, lead to a paralysis within the company and in the end turn out to be much ado about nothing," he added.

But some shareholders wanted details about the probes undertaken by the bank.

Roby Tschopp, director of Actares, a group of small shareholders, said ahead of the AGM that details were scant on the investigations carried out by UBS which led to the decision to absolve the former executives from blame.

Mr Tschopp added that a parliamentary commission is expected to begin a separate probe in June, and therefore it would be inappropriate to discharge the former executives now.

"If the commission finds something else that is clearer, it could help us" in building a legal case, he said.

The iconic bank in Switzerland sank into the biggest annual loss in Swiss corporate history at the height of the crisis in 2008, losing a massive CHF21.29 billion, as its bets on the subprime mortgage market in the United States soured.

US tax authorities added another blow through two lawsuits against the bank for helping American clients to evade taxes.

The bank paid $780 million to settle one of the cases. In the other case, it agreed to deliver data of 4,450 clients to the US authorities, a move which effectively dilutes the country's sacrosanct banking secrecy.

The bank has been struggling to build its reputation since, with outflows reaching a colossal CHF226 billion in 2008 and CHF147.3 billion in 2009 as clients took their assets elsewhere.

Yesterday, the bank's chief executive Oswald Gruebel acknowledged that the bank "must assume that we will have to accept further outflows before we can turn this trend around" even if the bank is "back on track".

The bank had announced this week that it would report a pre-tax profit of at least CHF2.5 billion for the first quarter. Its full quarterly earnings report is due on May 4.