The agreement last week by a Swiss bank to settle with US authorities will likely see more such deals, and eventually, more industry consolidation, analysts say.

(Updated with reaction)

There have been false dawns before but at long last there are signs that a miserable period for Swiss banks in their wrangles with the US could be starting to wind down, with banks now more able to focus on developing business rather than playing defence.

That, at least, seems to be the reaction of analysts in the wake of last week’s announcement (see the story here) that Lugano-headquartered BSI, in the process of being taken over by Brazil’s BTG Pactual, had entered a resolution agreement with the US Department of Justice. It has paid a $211 million penalty and avoided prosecution for suspected tax-related offences, becoming the first Swiss bank to make such a deal under a Swiss-US disclosure programme agreed in August 2013.

The move paves the way for other banks that have signed up to the Swiss-US programme to reach agreements, such as EFG International, according to analysts at Berenberg, the German bank.

“This [agreement] should accelerate sector consolidation among small- and medium-sized players driven by gross margin pressure,” Berenberg said in a recent note. “We would be buying EFG on valuation, the imminent removal of the US litigation overhang and its strong position ahead of the upcoming sector consolidation,” it said, adding that other banks likely to benefit from industry consolidation are Vontobel and Julius Baer. Berenberg has a “buy” recommendation on EFG International and a “hold” position on Vontobel and Julius Baer.

So far, around 100 Swiss financial institutions out of a total of more than 300 have signed up to the Swiss-US programme. Swiss banks can obtain a non-prosecution agreement if they provide information on US client accounts and agree to pay a penalty. (Banks that face criminal probes, such as Julius Baer, are not part of this agreement.)

Berenberg goes on to argue that there has been “a lot of confusion about the potential penalty of the banks that increases their perceived risk”. But the firm says the current agreement dictates a formula of 20 per cent of all non-disclosed US accounts that were held by the bank on August 2008, 30 per cent for accounts opened from August 2008 to February 2009, and 50 per cent for accounts opened since then.

The analysts also argue that there should be progress on Julius Baer’s own legal wrangles in the US.

The Berenberg conclusions are broadly shared by international law firm Withers. In a note earlier this week, Paul Behling, based in the firm’s Zurich office, said the BSI case was a “good sign for Swiss banks”.

“I would expect that a number of other banks will likewise complete their negotiations in the weeks and months to come. However some banks with more complicated issues may linger for many months before reaching their final agreement with the DoJ. Overall the BSI agreement should be viewed as a positive development, since it is a final resolution of the US tax issues and investigation of Swiss banks that has been pending for more than six years now,” he said.

Behling threw out a note of caution to BSI clients.

“US customers of BSI should be wary, however, as they have not previously made a voluntary disclosure to the IRS so that their accounts are fully tax compliant. The agreement means that their data may soon be released. If they have not made a voluntary disclosure there may still be time, but the penalty under the Offshore Voluntary Disclosure Program has now increased for BSI customers from 27.5 per cent to 50 per cent,” he said.  

Not everyone agrees that Swiss banks are out of the wood yet. Philip Marcovici, a lawyer and expert on cross-border tax and disclosure issues (he is also a member of this publication's editorial advisory board) says that the US has been a relatively small market for Swiss private banks, while other nations, such as France, Argentina and India are just starting to focus on Swiss banks and undisclosed assets.

(Editor's note: The BSI agreement may not be quite the landmark decision that some analysts claim, but it is perhaps a sign of gathering momentum as far as disclosure is concerned. Also, the recent political and media storm over HSBC's private bank in Switzerland shows that even accounts that were set up 20-plus years ago, and which may have been since shut down, still have the potential to embarrass bankers. So one should not expect stories about the real or alleged misdeeds of Swiss banks to be disappearing from the headlines any time soon.)