THE SWISS cabinet held a special meeting yesterday to discuss a snag in talks to settle the US tax evasion case hanging over bank UBS, the sternest challenge to Swiss bank secrecy rules yet.

The Swiss government, currently in recess, held an extraordinary meeting, an official said, but declined to give any detail until a final deal is done.

Switzerland and the US failed last Friday to agree on a settlement that would spare UBS a tax trial. Talks will continue until tomorrow, when a new status conference with US judge Alan Gold is scheduled.

The case has big implications not just for Switzerland, whose private banks manage about $2 trillion (€1.4 trillion) of foreign wealth, but for the entire offshore banking industry. “My suspicion is that it is not good news. I’m sure there will be a resolution, but whether it will be as beneficial for UBS as the market was hoping is not looking likely,” said Helvea bank analyst Peter Thorne.

Berne and Washington have said they have reached agreement on the main issues, and a settlement is expected to involve the disclosure of some of the names of the 52,000 US clients holding secret Swiss accounts the US authorities are seeking.

The settlement talks are extending into a fifth week, underscoring the difficulties of designing a pact that could further erode Swiss banking-client secrecy, said Sarasin analyst Rainer Skierka.

Swiss media have said US-Swiss talks have stalled on legal details on how to allow the transfer of some client data to Washington while respecting Swiss bank secrecy laws.

“It is not a problem that has to do with UBS but rather with the legal procedure,” Swiss finance minister Hans-Rudolf Merz said at the weekend.

According to Swiss newspaper NZZ am Sonntag, the US wants guarantees that the so-called administrative assistance process, the legal framework under which bank client details can be transferred to the US, will deliver the data and that it would do so quickly. However, Mr Merz said Switzerland was not prepared to introduce emergency measures to force the pace of the process.

Under the current system, bank clients have 30 days to appeal to the Swiss administrative court against a transfer of their data to a foreign authority, a court spokeswoman said.

A decision on whether or not data can be transferred can take at least three months, said Christoph Bandli, who heads the Swiss administrative court.

Originally scheduled for July 13th, the case against UBS is now set for court next Monday, but if the parties choose to delay further the next available date would be September 21st.

Berne already stretched its legal system in February when it forced UBS to quickly hand over 250 client names, bypassing the clients’ appeals, in order to settle criminal charges that threatened the bank’s survival.

UBS’s clients are believed to include businesspeople who have received offshore compensation via Swiss accounts and those whose main objective in opening such accounts was to avoid taxes. – (Reuters)