News Dec 31, 2015 12:28 AM EST

Julius Baer reaches agreement over U.S. tax cases with $200 million extra provisions

By Staff Writer

Julius Baer Group AG said on Wednesday that it has reached a preliminary agreement with the U.S. officials   over an investigation into whether the Swiss private bank had helped wealthy American clients evade taxes.

The Swiss bank said that based on its new agreement with the U.S. authorities for the Southern District of New York, it has set aside nearly $200 million in additional provisions to settle the U.S. tax investigations.

According to Market Watch, Julius Baer has increased its provision to $547 million, from the $350 million it announced in June.

Analysts were predicting in May that Julius Baer could face the provisions for the U.S. tax issue of as much as $900 million. However, the bank reset the expectations in June by announcing it had set aside $350 million to settle the U.S. tax investigations.

Julius Baer's shares rose as much as 4.4 percent on relief that the provisions were lower than expected.

Julius Baer said that the provision will be charged to the Swiss bank's financial results for 2015. The bank said that it expects to report an adjusted net profit for the year.

The U.S. officials have conducted investigations targetting several Swiss banks after the Swiss financial services company UBS agreed to pay $780 million fines in 2009, according to New York Times.

The U.S. officials claimed that UBS had helped the U.S. clients evade taxes. The UBS also agreed to identify the name of its U.S. clients.

According to Reuters, Julius Baer's penalties look much lighter than those paid by larger rival Credit Suisse. The larger Swiss bank was fined $2.5 billion in 2014 for helping the U.S. clients evade taxes. The bank was pleaded guilty to a U.S. criminal charge.

The Swiss oldest private bank, Wegelin & Company, was also pleaded guilty to violating American tax laws after the investigations. The bank closed shortly after agreeing around $500 million of the financial penalties.

The U.S. officials began investigating Julius Baer in 2011. The third largest Swiss bank Baer said that it expects to reach a final settlement with the U.S. attorney's office for the Southern District of New York, which conducted the investigation, in the first quarter of next year. The agreement remains subject to the final approval by the U.S. Department of Justice.

Analysts said that the potential settlement might end the tax evasion cases for Julius Baer. However, it is still unclear whether the bank would be forced to plead guilty to criminal charges like Credit Suisse and Wendelin & Co.

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