Switzerland, the world’s largest offshore wealth center, worth an estimated $2.2 trillion in assets, has signed an agreement to share financial information with nearly 60 other countries, which could completely change the country’s financial landscape.
The country has made a giant leap towards banking transparency after it signed a convention with the Organization for Economic Cooperation and Development (OECD) agreeing to exchange data with 60 member countries.
Switzerland already has bilateral tax collection agreements with the UK and Austria, but the move to chip away another layer of the country’s infamous banking secrecy was prompted by international pressure from the US, Germany, and France,
The tax agreement, called the Multilateral Convention on Mutual Administrative Assistance on Tax Matters came into force in 2010, and includes all G20 states, and most European states. The convention requires participants to pool tax collection information, and includes automatic exchanges, in some cases.
Under the convention, the Swiss government can call on large private banks like UBS AG, Julius Baer, and Credit Suisse Group AG to turn over confidential information to international tax watchdogs.
The crackdown on the tight-lipped policy could cost the Swiss business, as the new policy may be a turn-off for foreign banks. At the beginning of 2012, 145 foreign banks had offices in Switzerland, and as of May 2013, 16 had left, according to data from the Association of Foreign Banks in Switzerland.
Between 2008 and 2012, foreign bank assets decreased by $921 billion, as tax evasion eroded and clients withdrew money.