UBS avoids US tax fine, will expose clients

STRICKEN Swiss bank UBS will walk away from its epic fight with the US tax authorities without paying a fine, in a deal designed to head off a diplomatic crisis between the two nations, it emerged yesterday.<br /><br />But UBS is to hand over details of 5,000 rich American clients who may have evaded taxes to the US authorities, in a move that could jeopardise the centuries-old Swiss tradition of absolute banking secrecy. <br /><br />The bank, which has suffered catastrophic losses in the credit crunch, is expected to announce on Friday that it has avoided having to pay a potentially terminal fine to the US. It also hopes to announce that the court trial against it is set to be called off. <br /><br />Under the settlement, said to be an &ldquo;agreement in principle&rdquo;, UBS is likely to reveal far fewer than the 52,000 client names the US had been pushing for, but would include the biggest accounts, US government sources were saying yesterday.<br /><br />Switzerland&rsquo;s top diplomat Michael Ambuehl told Swiss newspaper NZZ am Sonntag yesterday the deal would not violate Swiss law.<br /><br />&ldquo;The Swiss legal system is maintained, because the US have promised to act on the basis of the current agreements and to ask for legal assistance again,&rdquo; said Ambuehl, who is state secretary in the foreign ministry.<br /><br />UBS, which is struggling to recover from the subprime crisis after posting the biggest annual loss in Swiss corporate history last year, agreed in February to pay $780m (&pound;467m) to settle separate but related criminal tax fraud charges. <br /><br />The bank will report second-quarter results tomorrow and analysts expect a 1.1bn Swiss francs (&pound;616m) loss.