Swiss Finance Minister Hans-Rudolf Merz has warned UBS not to breach Swiss banking secrecy rules by handing over client details to US authorities investigating tax evasion.

“There is always the danger that one wants to quickly sort out the difficulties and and somehow find a fast solution,” Merz said in an interview. “Banking secrecy must be defended. Whoever undermines it, would be acting illegally,” he said.

“UBS cannot just give out customer lists. That would infringe banking secrecy and I cannot accept that.”

In May, the US Department of Justice and the Securities and Exchange Commission revealed they were investigating UBS’s conduct in relation to cross-border services provided by UBS advisers to US clients from 2000 to 2007.

UBS is accused of helping wealthy Americans avoid taxes by hiding assets in Switzerland. The case could ultimately force UBS to reveal the names of the US clients, striking at the heart of Switzerland’s prized banking secrecy rules.

Merz said US justice authorities were making far-reaching demands in the UBS case, but it still had to be established if they would affect banking secrecy. While Swiss banks have adopted the “know your customer” rule to avoid laundered and ill-gotten money, they do not classify tax evasion as a crime. “I am confident that we will find solutions with the US authorities and all those involved in line with legal proceedings,” he said.

UBS has already said it would stop offering offshore Swiss bank accounts to US citizens, and is expected to seek a settlement in the tax evasion case with US authorities. Last month, UBS said it would cost the bank $900 million to settle a separate US case in which it was accused it of steering clients towards auction-rate securities – debt which became impossible to sell after the market froze.

Merz said he supported moves by Swiss regulators to introduce tougher capital rules for the country’s banks, after UBS and Credit Suisse suffered big losses in the financial crisis triggered by the US housing market meltdown.

The minister also welcomed UBS’s announcement last month it will to split its core wealth management business from its investment banking operations, saying it was good wealth management would no longer be used to subsidise other units.

“They have also created the conditions to split off investment banking in case they want to do that one day, although that is not the case at the moment,” he said

Source: ET.com