With the agreement of the last institute in the second of three categories involved in the tax dispute between the U.S. authorities and the Swiss banks, an important milestone has been achieved – at a high cost.

HSZH Verwaltungs AG has signed an agreement with the U.S. Department of Justice, which will prevent a further criminal investigation for facilitating tax evasion by U.S. citizens, the DoJ said in a statement last night. In return, HSZH will pay a fine of $49.7 million. HSZH was formerly known as Hyposwiss Privatbank Zurich.

The cantonal bank of St. Gallen acquired Hyposwiss in 2014. The regional bank is satisfied that the tax dispute has been settled for its part and included the costs for reaching the agreement and the fine in last year's result.

St. Galler Kantonalbank expects a full-year profit of about 133 million francs, with an unchanged dividend of 15 francs a share.

Milestone Agreement

The last agreement of the second category ended with a very high fine for the size of the institute, but with 605 accounts, the former Hyposwiss managed a substantial number of accounts with a U.S. tag attached. At the most, it had $1.12 billion in assets under management falling into this category.

«The department’s Swiss Bank Program has been a successful, innovative effort,» said Stuart F. Delery, acting associate attorney general at the DoJ, in Wednesday night's statement. «As we have seen over the last year, Swiss banks are paying an appropriate penalty for their misconduct.»

Paying Dearly

Swiss banks in category 2 received fines amounting to $1.36 billion since the first agreement was signed March 30, 2015 with BSI. The institutes are also required to cooperate with the U.S. in any related criminal or civil proceedings.

The price for helping U.S. tax dodgers hiding their assets cost Swiss banking very dearly. Apart from the immediate costs in fines and legal fees, Switzerland's banking secrecy law was largely done away with and the reputation of the entire industry suffered.

Among the banks in the first of the three categories, a number of institutes still await their verdict: Julius Baer, Pictet, Basler Kantonalbank (BKB)  and Zuercher Kantonalbank (ZKB).