Banks had better opened their books and fessed up about their messy investments. It would help to regain some trust, which is beneficial both for the economy at large and for banks in specific.

Along these lines was the message brought by European commissioner Neelie Kroes last Saturday at a conference organized by the Deutsche Bank in Frankfurt. According to Kroes, banks have thus far taken little responsibility, and unless they provide more transparency, they won’t be able to count on any further government support.

Around the same time, the issue of bank privacy was brought to discussion. Should banks be allowed to protect the identity of their account holders?

Tax havens yield
Luxembourg, Switzerland and Austria indicated last week that they will start cooperating with other countries to fight fraud and tax evasion. A couple of days later, Liechtenstein and Andorra released similar statements.

The countries yielded to great diplomatic pressure from the EU, the USA and the Organisation for Economic Co-operation and Development (OECD), who are trying now more than ever to prevent tax money from slipping away to anonymous numbered accounts. They are afraid that their reputation will suffer if they continue to uphold bank secrecy. More concrete: the possibility of being put on a special blacklist of non-cooperative tax havens during the G20 summit next April in London.

While they are in principle willing to cooperate, Luxembourg, Switzerland and Austria did add that they will not indiscriminately open up their books for government representatives to browse freely. Instead, a specified request must be made that is based on a reasonable suspicion of tax evasion or fraud. This is in accordance with OECD guidelines, but the question remains whether the EU will agree to these conditions.

Amnesty
In addition to this, Liechtenstein and Switzerland want a one-off amnesty for tax evaders. Such an arrangement would give tax evaders a limited opportunity to declare their savings and retroactively pay the necessary taxes, without having to pay additional fines. After that, the game is up and any further tax evasion is prosecuted and punished as usual.

Another issue that remains to be settled is the legality of surrendering bank secrecy. After all, the banks entered an agreement with their clients, which includes a commitment to the privacy of the client. Rainer Prokisch, professor in European tax law at the University of Maastricht, the Netherlands, does not deem it unthinkable that clients will take this issue to court.

What do you think? Should banks open up their books to the public when it comes to risky investments? Will this help re-establish faith and stabilize the economy? And what about anonymous bank accounts? Is the same amount of transparency justified?