News that a well-known bank has had to be bailed out by another would normally send shock waves around the corridors of Davos.This content was published on January 27, 2012 - 17:39
But I predict that most WEF delegates will scarcely bat an eyelid at the fate of Switzerland's oldest private bank, which has been driven into the arms of the Raiffeisen group.
Wegelin is no Merrill Lynch and its current travails won’t cause a domino effect among the wider banking community – nor will they do anything to endanger liquidity in the system and will certainly not result in a credit crunch.
The WEF’s showpiece event in Davos is no place for Switzerland's private bankers, who like to keep a lower profile well away from politicians, regulators and the public glare.
Banking secrecy and tax evasion are barely getting a mention here. There is much talk about income inequality, but this is centred on the outlandish bonuses of investment bankers and the ridiculously low rates of tax the rich have to pay.
There is of course a link between inequality and tax evasion, a game played by wealthy people to keep hold of their precious fortunes.
US President Barack Obama has made it a personal mission to hunt out tax cheats, and his personal cause has given weight to the crusade that has caused such a stir in Switzerland.
But he appears to have switched his attention to the low tax rates of the rich in the US and the legitimate tax evasion of US firms which legally park a large chunk of their assets in countries such as Switzerland to avoid a heftier tax bill back home.
Swiss Finance Minister Eveline Widmer-Schlumpf said after meeting US Treasury Secretary Tim Geithner in Davos on Thursday that a deal to end the tax evasion row with the US could come later this year.
Much as Wegelin might be a cherished institution in Switzerland, it is small fry for the US tax authorities and for most WEF delegates. The bank's fate is another nail in the coffin of Swiss banking secrecy, but the tax revenues garnered from US firms resident in Switzerland may be the next target in Obama’s sights – if he stays in power.
Below: Konrad Hummler, senior managing partner of Wegelin & Co, sizes up the situation
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