Banking secrecy needs to be redefined: Luxembourg

GENEVA: Banking secrecy needs to be redefined, but abolishing it abruptly is not in Europe's interest, Luxembourg's deputy prime minister said on Sunday, amid renewed debate over the concept sparked by a US tax probe of Swiss banking giant UBS.

"Old school Luxembourgers say that without banking secrecy, our country would not have gained such importance as a financial centre," Jean Asselborn, who is also minister for foreign affairs and immigration, told the Swiss newspaper Sonntag.

"But in the 21st century, banking secrecy cannot be the only instrument with which Luxembourg drives its economy. Therefore, we need perhaps to redefine banking secrecy and little by little to expand on the advantage of competence," he said.

This week Switzerland's biggest bank UBS provided data on 250 to 300 clients to the US government, as it also admitted to aiding tax fraud in the United States.

However, a day later Washington upped the ante by filing a lawsuit to try to force UBS to disclose the identities of 52,000 US customers who allegedly evaded taxes, sparking debate about the "end" of banking secrecy.

Like Switzerland, Luxembourg has strict banking secrecy rules protecting client confidentiality.

Asselborn warned that it would not help the European Union to abolish banking secrecy suddenly, as money could flow out of Europe.

It could also lead to job losses, he added.

"We have 150,000 workers who cross the borders daily to work; 73,000 come daily from France, just as many come from Germany and Belgium. If the banking centre is destroyed, it is a disadvantage for not just Luxembourg, but the whole region," he said.

He also expressed frustration at critics for targetting Switzerland and Luxembourg amid the financial downturn.

"I am disturbed by the debate that concentrates on Switzerland and Luxembourg in the search for the cause of the financial crisis. It would be fatal and wrong to look for those guilty for the financial misery here.

"How banks in the US dealt with credit ... has nothing to do with Switzerland or Luxembourg, and nothing with banking secrecy."

Austria, Belgium and Luxembourg are the three European Union states with strict bank secrecy rules.