Shares in UBS AG were up Thursday morning on the Zurich exchange, a day after it was announced the bank would divulge information to US tax authorities on 4,450 accounts and the Swiss government said it would exit its investment in the bank, according to dpa. Shares were up 4.48 per cent and were trading at 17.49 Swiss francs (16.41 dollars) in the early afternoon. Traders had expected the shares to open lower. The Swiss government announced late Wednesday, after US markets closed, that it would sell the roughly 9-per-cent stake in UBS it obtained last year as part of a bailout for the troubled institution. The sale of the government's 332.2 million francs in mandatory convertible notes was expected to be completed during the course of the day. The stake was estimated to be worth 5.56 billion francs before trading. Combined with interest UBS would pay Bern, the government expected to recoup its 6-billion-franc investment in the bank and make a profit. The government said the deal with the US, which would see the bank hand over details on accounts which historically benefited from an almost absolute veil of secrecy, combined with the capital UBS raised last month, allowed it to end its investment while being certain of the stability of the institution. "Today, UBS has a stable, sound capital base," Finma, the Swiss regulator, said in a statement welcoming the government's sell-off. While still reporting losses this year, the bank said in its second quarter results that its Tier 1 capital ratio was improving, a sign of regulatory health. It would likely use some of this capital to pay back the government. The US had originally demanded details on up to 52,000 accounts, but went after the largest fish in the end. The 4,450 accounts are estimated to hold some 18 billion dollars, on which the clients are alleged to have not paid their taxes to the US. The agreement includes a stipulation that the summons against UBS in the US court system would only be withdrawn after Washington received information on 10,000 accounts. The full details of the deal will be made public in 90 days. The deal with the US was generally perceived as a good outcome in the Swiss media Thursday, with analysts noting the resolution could have been much worse and much more drawn out. However, many papers pointed out some of the catches to the deal, noting the sour side for the nation's financial sector, and the fact that the US got much of what it wanted. First, the Swiss government left the door open for more demands from the US for information on other accounts, possibly at other banks. As part of the deal UBS would encourage its clients to come clean with the US authorities. An existing programme in Washington, meant to enable tax evaders to pay up and avoid jail, has already lead to more information on where people hid assets. Analysts were still questioning how much legal risk UBS would be exposed to, as its clients told all to US authorities. Also, Swiss analysts noted, the deal allows for the Internal Revenue Service to ask for data even if it does not have the client name, a practice known as a "fishing expedition." Finally, beyond the obvious blow to banking secrecy, the bilateral agreement between the governments also breaks Switzerland's long- standing differentiation between tax evasion and tax fraud, only the latter of which had previously allowed as an excuse to lift the veil. Some papers noted that UBS had acted illegally in trying to help clients evade taxes, weakening Switzerland's position in the negotiations as it tried to uphold banking secrecy. On the other hand, the transfer of data would be generally in line with a wider interpretation of Swiss laws. The Swiss SMI index as a whole was up 1.18 per cent just after noon. UBS's cross-town rival, Credit Suisse - the largest Swiss bank by market capitalization - was also higher by 3.06 per cent, at 53.90 francs. Julius Baer, another large Swiss bank whose name has come up in talks about crackdowns on tax-avoiding US citizens, was 0.12 per cent higher, trading at 48.28 francs.
