The United States and Switzerland agreed to resolve a long-running dispute over offshore tax evasion by letting some banks voluntarily disclose wrongdoing and turn over account information on American clients, a senior Justice Department official familiar with the matter said Wednesday.
The accord divides Swiss banks into four tiers: 14 banks under criminal investigation; those allowed to avoid prosecution by disclosing wrongdoing; those without wrongdoing to disclose; and those complying with U.S. anti-tax evasion law, said the official, who was not authorized to discuss the matter publicly and asked not to be named. Total penalties by banks making voluntary disclosures could exceed $1 billion, the official said.
The pact lets Switzerland, the world’s largest offshore financial center with about $2.2 trillion of assets, resolve negotiations spanning two years after U.S. criminal prosecutions eroded Swiss bank secrecy.
“The program enables all banks in Switzerland to settle their U.S. past quickly and conclusively and creates the necessary legal certainty,” the Swiss Bankers Association, which represents more than 300 banks, said Wednesday after the Swiss government made an earlier announcement.
The accord will require banks making disclosures to describe how they enabled tax evasion, including third-party advisers and other professionals involved, the official said. They also must disclose information on an individual basis about U.S. clients with direct or indirect ownership of accounts, including their dollar values, the person said.
The United States will still investigate wrongdoing by the 14 financial institutions, including HSBC, the largest European bank, and the Julius Baer Group.
— Bloomberg News
The six biggest U.S. banks, led by JPMorgan Chase and Bank of America, have piled up $103 billion in legal costs since the financial crisis, more than all dividends paid to shareholders in the past five years.
That is the amount allotted to lawyers and litigation, as well as for settling claims about shoddy mortgages and foreclosures, according to data compiled by Bloomberg News. The sum tops the banks’ combined profit last year.
The mounting bills have vexed bankers who are counting on expense cuts to make up for slow revenue growth and make room for higher payouts. About 40 percent of the legal and litigation outlays arose since January 2012, and banks are warning that the tally may surge as regulators, prosecutors and investors press new claims.
JPMorgan and Bank of America bore about 75 percent of the total costs, according to the figures compiled from company reports. JPMorgan devoted $21.3 billion to legal fees and litigation since the start of 2008, more than any other lender, and added $8.1 billion to reserves for mortgage buybacks, filings show.
Spokesmen for the six banks — which included Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — declined to comment about their legal costs.
— Bloomberg News
l The price of oil climbed to its highest level in more than two years Wednesday. Benchmark oil for October delivery rose $1.09, or 1 percent, to $110.10 a barrel on the New York Mercantile Exchange. That is its highest closing price since May 3, 2011. Earlier in the session, oil climbed as high as $112.24.
l Toyota Motor, which dominates the hybrid-vehicle market with its Prius, said the company’s next generation of batteries will be more efficient and improve mileage. Toyota’s future hybrids will have batteries with higher energy density and power, Satoshi Ogiso, chief engineer for the Prius line, hybrid vehicles and plug-in hybrids, told reporters in Ypsilanti, Mich., on Wednesday. He did not give details about when the carmaker’s next hybrids will arrive or specifics about mileage.
l Fast-food customers in search of burgers and fries on Thursday might run into striking workers instead. Organizers say thousands of fast-food workers are set to stage walkouts in dozens of cities around the country, part of a push to get chains such as McDonald’s, Taco Bell and Wendy’s to pay workers higher wages. It is expected be the largest nationwide strike by fast-food workers, according to organizers.
— From news services
l 8:30 a.m.: Second-quarter gross domestic product and weekly jobless claims released.
l 10 a.m.: Weekly mortgage rates released.
l Earnings: Campbell Soup, Krispy Kreme.