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

Alexandre Ziegler (), François-Xavier Delaloye () and Michel Habib ()
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Alexandre Ziegler: HEC, University of Lausanne and FAME
François-Xavier Delaloye: HEC, University of Lausanne
Michel Habib: Swiss Banking Institute, University of Zurich

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

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 (search for similar items in EconPapers)
JEL-codes: G14 G18 G21 (search for similar items in EconPapers)
Date: 2005-10
New Economics Papers: this item is included in nep-eec, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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