In announcing a EUR 50 million payment to the German authorities to end an investigation into its clients’ business in the country, Bank Julius Baer may have unwittingly set an unwelcome precedent that could rebound nastily on Swiss private banking.

The settlement is aimed at avoiding "lengthy and for both sides cumbersome legal proceedings" centring on undeclared assets held by clients subject to German taxes, according to a statement by Baer.

The threat of German action dates back to last October, when it became evident that the German tax authorities had acquired a stolen data disc containin...