After some dubious practices, the vaunted banks of Switzerland are under scrutiny, and this may not bode too well for an economy or its exchange traded fund (ETF), which is heavily weighted in this sector.

The stability of Switzerland could in jeopardy as its largest bank (UBS) is in the throes of a tax scandal on top of $53 billion in write-downs on U.S. subprime securities, reports Nelson D. Schwartz for The New York times.

UBS forked over $780 million in fines and revealed 250 client names to avoid a criminal indictment, which was not taken too well by a country that prided itself on its “bank privacy.” The Alpine wealth haven is also readying itself for a lashing as a Senate panel looks into how UBS helped U.S. taxpayers evade the IRS.

Peter Kurer, the chairman of UBS during the tax and subprime brouhahas, has been ousted and the former finance minister, Kaspar Villiger, will replace him.

The balance sheet of UBS is around $2 trillion, or four times that of Switzerland’s GDP. All Swiss bank assets amount to 6.8 times GDP. The financial service sector contributes 12.5% to the Switzerland’s GDP.

In previous years, the Swiss economy grew almost 3% annually, but in the fourth quarter, it contracted 0.6%.

• iShares MSCI Switzerland Index (EWL): down 16.2% in the last month; down 17.5% in the last three months; holdings of 5.1% in UBS; the Swiss financial sector amounts to 20% of this fund; it’s down 7.7% since the bank was forced to reveal the names of its account holders
  

Tags: Europe, EWL, Financial, Global ETFs, Switzerland