UBS existence at stake in US tax case: Swiss regulator

GENEVA: The tax fraud charges against UBS in the United States could have threatened the very existence of Switzerland's biggest bank, the Swiss financial markets watchdog revealed in a reprimand published on Thursday.

The official regulator, FINMA, said in a statement that the 789-million-dollar (627-million-euro) settlement the bank agreed with US justice authorities on Wednesday avoided criminal charges that could have dried up the already troubled bank's liquidity.

"Such charges could have had drastic consequences for UBS and its liquidity situation and ultimately put its existence at risk," FINMA said in a statement.

Switzerland's banking flagship posted an annual loss of 17 billion dollars in 2008, the largest in Swiss corporate history, and received a 60-billion-dollar state aid package after it was battered by the financial crisis and credit squeeze.

The regulator said it "ordered UBS to surrender a limited quantity of client data and handed it over to US authorities."

FINMA also issued a reprimand to UBS after its investigation concluded that the bank had not only violated US law but also "severely breached" Swiss banking regulations.

"Specifically, the manner in which it captured, limited and supervised the legal risks associated with the cross-border business with US private clients was ultimately deficient," the regulator said.

The investigation concluded that staff at the bank had accepted statements from clients "which they knew or should have known" were not accurate and ignored some US supervisory rules "for an extended period of time."

The bank admitted that it had been involved in a "fraudulent sham."

"UBS sincerely regrets the compliance failures in its US cross-border business that have been identified by the various government investigations in Switzerland and the US, well as our own internal review," chairman Peter Kurer said in a statement.

"We accept full responsibility for these improper activities," he added.