Negotiating Over Banking Secrecy: The Case of Switzerland and the European Union

38 Pages Posted: 2 Nov 2005

See all articles by Alexandre Ziegler

Alexandre Ziegler

University of Zurich - Department of Banking and Finance

Francois-Xavier Delaloye

University of Lausanne - Department of Economics (DEEP)

Michel A. Habib

University of Zurich; Swiss Finance Institute

Date Written: October 2005

Abstract

Over the period 2002 to 2003, Switzerland and the European Union (EU) were engaged in negotiations regarding banking secrecy. The EU's stated goal was for Switzerland to abolish banking secrecy. Switzerland refused and offered to impose a withholding tax on interest income instead. The two parties eventually agreed on the latter solution. We examine the effect of these negotiations on the share prices of four Swiss banks: UBS, Credit Suisse Group (CSG), Julius Baer (Baer), and Vontobel. Overall, investors believe that bank profitability will not be impacted by the imposition of the withholding tax. The event-by-event response of the share prices differs across banks. Whereas the two universal banks (UBS and CSG) primarily react to the threat of sanctions on their EU-based operations, the private banks (Baer and Vontobel) react strongly to events suggesting that banking secrecy might be abolished.

Keywords: Banking Secrecy, Switzerland, Event Study

JEL Classification: G14, G18, G21

Suggested Citation

Ziegler, Alexandre and Delaloye, Francois-Xavier and Habib, Michel A., Negotiating Over Banking Secrecy: The Case of Switzerland and the European Union (October 2005). Available at SSRN: https://ssrn.com/abstract=830784 or http://dx.doi.org/10.2139/ssrn.830784

Alexandre Ziegler

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Z├╝rich, 8032
Switzerland

Francois-Xavier Delaloye

University of Lausanne - Department of Economics (DEEP) ( email )

BFSH1
Lausanne, 1015
Switzerland

Michel A. Habib (Contact Author)

University of Zurich ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland
41-44-634-2507 (Phone)
41-44-634-4903 (Fax)

HOME PAGE: http://www.isb.uzh.ch/institut/profs/mhabib.htm

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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