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ZURICH (Reuters) - The head of Credit Suisse CSGN.VX denied on Monday that Swiss banks have been undermining a tax pact with Germany by helping wealthy clients move funds to rival financial centers such as Singapore to avoid becoming subject to taxes.
German media have accused Swiss banks of telling German clients to shift money to Singapore, Asia's prominent finance centre, to avoid detection and taxation of their assets.
The allegations have made it more difficult for Germany and Switzerland to finalize a proposed deal that would leave German account holders anonymous, but under which the Swiss government would impose a retroactive withholding tax and would tax future interest income on the accounts.
A strategy of aiding tax dodgers is "economically stupid and morally unacceptable", Credit Suisse Chairman Urs Rohner told a conference.
"Some of the noise...is clearly unfounded as far as I can check. For example, the accusation that a lot of clients funneled funds to other offshore centers like Singapore. Recent statistics on money flows will show you it's actually the other way around with regards to German money," he said.
The Swiss government has agreed on deals with Britain, Austria and Germany, is pursuing similar pacts with Greece and Italy, and has several more countries "banging on its doors" to negotiate treaties, Swiss banking lobby chairman Patrick Odier told the same business audience on Monday.
But the agreement with Germany may be nearing collapse after Germany's opposition Social Democrats made tax evasion an election issue.
Also Monday, UBS's UBSN.VX chairman Axel Weber voiced confidence the two countries would resolve their differences in time for the deal to take effect January 1. Weber's comments on the tax pact are noteworthy because in May, he switched sides and jobs, leaving as the head of Germany's Bundesbank to join the Swiss bank.
"This is an issue that can be solved rationally," between neighbors, Weber said, adding that the two countries had more common interests than differences.
German authorities in July raided the homes of clients of Credit Suisse.[ID:nL6E8IB22J] Last year, the bank paid a fine of 150 million euros ($189.1 million) to end an investigation over allegations the bank and its employees helped Germans dodge taxes. [ID:nL3E7KJ0H0]
Opposition Social Democrats (SPD) leader Sigmar Gabriel said earlier this month there had been "organized crime in Swiss banks" helping Germans avoid tax evasion. Swiss bankers and politicians have denied the allegation.
German Chancellor Angela Merkel's government, which does not have a majority in the upper house, has said a tax deal could net Berlin huge sums, if and when it takes effect. Germans hold an estimate 150 billion euros in Swiss accounts.
Credit Suisse's Rohner urged the Swiss government to stay the course in negotiating deals with European governments.
"A withholding tax and a tax of legacy assets is the proper and sensible means to ensure tax compliance while safeguarding privacy," he said.
Most finance industry representatives at the conference favored tax deals and rejected the idea that Swiss banks would provide client information to other states.
"Changing to the automatic exchange of information is absolutely not compatible with the understanding of citizenship and government we have in Switzerland," said outgoing Economiesuisse head Gerold Buehrer.
In another speech, Swiss National Bank Chairman Thomas Jordan said called for more stability and fewer changes to the banking sector after current regulatory efforts are put into force.
"In such an environment, it is hard to maintain profit margins and retain clients," he said.
Banking contributes about 10 percent of Switzerland's gross domestic product.
Swiss regulator FINMA lauded Credit Suisse and rival UBS UBSN.VX for bolstering capital and cutting back on riskier activities.
"Both are on target with increasing their equity under the new requirements," which include a stricter interpretation in Switzerland of international Basel III reforms, FINMA Head Patrick Raaflaub said.
In July, Credit Suisse said it would boost its capital base by 15.3 billion Swiss francs ($16 billion) after a unusually sharp public rebuke from the SNB the month before.
editing by Jane Baird and Leslie Gevirtz