UBS can still settle a damaging U.S. tax case even though Washington is pushing ahead with a lawsuit to force the Swiss bank giant to identify offshore clients, the Swiss Finance Minister said.
A settlement, which would be the bank's second with U.S. authorities, would allow the world's biggest wealth manager to concentrate on a badly needed restructuring after it lost billions of dollars in the global financial crisis and had to be rescued by the Swiss state.
A settlement is always possible under U.S. legislation, Hans-Rudolf Merz told a news conference on Wednesday when asked about the chances of an out-of-court deal.
The U.S. Justice Department said in a court filing on Tuesday it was still seeking to force UBS to identify an estimated 52,000 Americans suspected of using secret foreign accounts to hide nearly $15 billion in assets from the U.S. taxman.
UBS has resisted the request because it says it would violate Swiss bank secrecy laws.
However, Merz said the DOJ filing was not the end of the story.
The Americans have the habit to proceed like this. I know from experience that they are used to settle conflicts this way, he told reporters after the news conference.
The lawsuit against UBS, which is losing clients due to its tax and subprime woes, is being closely watched by the offshore banking industry amid a global crackdown on tax cheats.
UBS and the Swiss government have argued that any exchange of confidential banking information should be handled through existing legal treaties rather than in the courts.
UBS shares were up 1 percent at 13.42 Swiss francs at 9:33 a.m. EDT against a 0.7 percent rise in the DJ Stoxx European banking index <.SX7P>, while U.S.-listed shares of UBS rose 2 percent to $12.45.
The DOJ filing says UBS earned more than $100 million in fees in helping American clients set up secret offshore accounts and that the business cost the U.S. Treasury hundreds of million of dollars in unpaid taxes.
UBS, which agreed to pay $780 million in February to avert criminal charges related to the tax dispute, is facing a first court hearing on July 13. At the time the bank also agreed to disclose to the U.S. the names of around 250 clients, a first major breach to treasured bank secrecy laws.
A settlement of the civil lawsuit, widely expected by tax experts, lawyers and analysts, would involve a fine that Swiss media say could amount to billions of dollars.
Although not a party in the lawsuit, the Swiss government is likely to be frantically working behind the scene to put an end to the damaging tax dispute, analysts say.
The likelihood of an out-of-the-court settlement, where UBS will probably have to pay another hefty fine, has not diminished, Sarasin analyst Reiner Skierka said in a note.
However, the involved parties could ask the judge for a postponement of the trial if they signal to be interested in an out-of-the-court-settlement.
UBS is trying to force its American clients to come clean, a move that may earn it some leniency. It has already told clients to move the money onshore or out of the bank and has restricted client information to their accounts from July 1.
But some analysts say this may not be enough to grant the bank a deal soon and uncertainty will continue to weigh.
It is highly unsure whether UBS will be able to settle with the IRS before the trial, although this would be ideal for UBS as it would allow the bank to start rebuilding, Vontobel analyst Teresa Nielsen said, referring to the U.S. tax authorities.
(Additional reporting by Albert Schmieder ; Editing by Erica Billingham)