Liechtenstein to lift some bank secrecy

Liechtenstein bowed to international pressure on Friday to lift some of the veil of secrecy on its banks and make it harder for wealthy foreigners to hide money there after a German scandal over tax dodgers.

Prince Alois von und zu Liechtenstein, the head of the tiny Alpine state nestled between Austria and Switzerland, did not say how much it would cooperate with countries who seek information about their residents who invest in the state.

But he said reform was needed to give bank customers more legal security and to reduce the potential for abuse of the financial sector, saying the principality would find "sensible solutions" for existing customers when it exchanges information.

In a national day speech, he said the principality could no longer rely on its renowned banking secrecy and political stability for the future success of its financial sector and said it needed to do more to develop "onshore" banking.

"Despite new cooperation in the taxation area, we will still be able to differentiate ourselves enough from other financial centres in future," he said, adding that customers still valued the state's strong culture of respecting individuals' privacy.

Liechtenstein bank insiders have suggested one possibility could be some kind of amnesty for long-standing clients.

Earlier this year, Germany began one of its biggest ever investigations into suspected tax dodging, forcing the resignation of one of the country's top business leaders, mail group Deutsche Post Chief Executive Klaus Zumwinkel.

The probe targeted 1,000 people suspected of parking money in Liechtenstein banks and involved raids on homes and offices across Germany. It also drew in other European countries, fuelling calls for a crackdown on tax havens.

Back then, Prince Alois defended Liechtenstein's banking secrecy rules and accused Germany of illegally acquiring secret bank data by purchasing information on suspected tax dodgers from an informant the principality views as a criminal.