UBS Group AG is “very pessimistic” about reaching an agreement with French authorities to settle a case of alleged tax fraud that forced the bank to post a 1.1 billion euro (US$1.18 billion) bond to cover any potential penalties three years ago, Journal du Dimanche reported.
France’s financial prosecutor is seeking a 1.1 billion euro fine from UBS to settle the case with no admission of guilt from the lender, the French newspaper said on Sunday, citing unidentified sources.
“Such a large amount is unthinkable vis-a-vis our shareholders as well as vis-a-vis other jurisdictions with which we have negotiated,” UBS general counsel Markus Diethelm said in an interview with the newspaper, in quotes the bank confirmed. “It’s not at all the market price.”
UBS has been pushing to settle the French investigation for less than the 300 million euros it paid to resolve a similar issue in Germany in 2014, people familiar with the matter said earlier this month.
The Swiss bank is looking to pay less than what it cost to resolve the German case as the French wealth-management market is much smaller, the people said at the time.
After several confidential meetings with France’s financial prosecutor, Diethelm said he is “very pessimistic” about reaching an accord.
“What was put on the table wasn’t reasonable,” he said.
French lawmakers last year approved a new civil settlement procedure requiring that fines be based on the advantage derived from the wrongdoing, within a limit of 30 percent of average revenue over the past three years. Talks between the financial prosecutor and UBS have been ongoing since.
Investigative judges, who ran the probe, are currently in a position to order a trial or dismiss the case, a move that would effectively end settlement talks. In February last year they completed their probe into allegations UBS conspired to help clients evade taxes in the country and laundered the proceeds.
While no action has been announced since then, the case might be sent to trial as soon as next week, the newspaper said, citing unidentified sources.
If the case goes to trial, UBS could be fined as much as 4.9 billion euros, or half of the 9.8 billion euros that investigative judges estimate French citizens have stashed in undeclared offshore funds managed by UBS.
UBS previously sought to reach a deal with French authorities before the new settlement procedure was approved, but talks broke down in July 2014 after the lender balked at entering a guilty plea.