Swiss bankers fear greater scrutiny in wake of Liechtenstein probe

( AFP )- Swiss bankers are keeping a watchful eye on Germany's controversial probes into alleged tax fraud in Liechtenstein. But they insist Switzerland's own bank secrecy laws are not up for negotiation.

"The security of banks in Switzerland is in good form, we don't see any reason to panic," a Swiss Bankers' Association spokesman told AFP.

A finance ministry spokeswoman also stressed that "on the basis of what we know right now, Switzerland is not affected" by the German probe.

The German finance ministry suspects that hundreds of affluent business, sports and entertainment figures have hidden up to four billion euros in such trusts and other accounts in Liechtenstein, a tiny principality wedged between Switzerland and Austria, to avoid paying tax.

The scandal is expected to bring renewed scrutiny to Switzerland's banking secrecy laws even if there is little chance of serious reform in the short-term, analysts said.

"There is no short-term risk for Switzerland, but perhaps in the medium term" it will face more pressures, according to Jan-Egbert Sturm, a director of economic research at the University of Zurich.

"Pressure on Switzerland is growing and the country is once again in the sights" of the international community, he said.

Swiss laws oblige banks to provide information in criminal investigations and to report any signs of money laundering, but effectively prohibit them from giving information to domestic or foreign tax authorities.

The Swiss Bankers' Association has itself been embroiled in the media storm surrounding the Liechtenstein affair after its head, Pierre Mirabaud, compared the methods of the German authorities to the Gestapo.

Mirabaud was forced to issue an apology, claiming he had merely "meant to express his uneasiness about such methods being used by intelligence services against friendly states."

Liechtenstein's Crown Prince Alois on Thursday said Berlin had undermined Liechtenstein's sovereignty by paying an informer more than four million euros (5.9 billion dollars) for banking data on which German investigators are basing the biggest tax fraud investigation in the country's history.

The affair has sparked keen interest in Switzerland, which has also come under fire in recent years for its banking secrecy and alleged use of its financial system for money laundering and other fraud.

The country reached an agreement with the European Union in 2004 to levy a withholding tax on interest earned by EU citizens on assets they might hold in Swiss bank accounts, to discourage tax evasion.

Last April, a former employee of private bank Julius Baer handed over confidential data on German clients to tax authorities in Germany, sparking an investigation into possible tax evasion.

Leading Swiss bank Credit Suisse said it has taken steps to improve security to prevent any such theft of data relating to its own clients.

"Our security levels are very high and we adapt them regularly," a spokeswoman told AFP.

The Swiss Bankers Association said last year that the Alpine republic is the world's third largest asset manager with over 6,900 billion Swiss francs (5,532 billion dollars, 4,280 billion euros) deposited in the country's bank accounts.

Swiss banking secrecy has long made the country a favourite for dictators seeking to stash often looted funds, such as the late Mobutu Sese Seko of Zaire, now the Democratic Republic of Congo.

But the Swiss government last year agreed to transfer back to the Congo some eight million Swiss francs which had been blocked in Swiss accounts held by Mobutu.

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