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UBS has found itself thrust to the forefront of the US administration’s new war on tax evasion – the biggest, but only the latest, battle that Oswald Grübel has had to take on since he became chief executive of the Swiss bank a few months ago.

Mr Grübel, formerly boss of arch-rival Credit Suisse, has started sawing away at headcount with his penknife, to cut 8,700 staff by next year. He has sought to refocus the bank on its domestic operations and, most important of all, its private bank, the world’s largest and also the heart of UBS’s franchise. To do this, he has shrunk the investment bank as private bank clients, scared by its huge losses, were leaving en masse. UBS says it staunched outlows at the start of the year. But then it handed the names of 300 rich US clients to US tax authorities, after being charged with helping them evade tax. Client defections rose again. In the first quarter, they withdrew more than SFr23bn. By contrast, Credit Suisse’s private bank reported net inflows of SFr11.4bn for the period.

This is a huge divergence. It is true that UBS’s investment banking woes, which continued into the first quarter with a SFr3.2bn pre-tax loss, had tarnished UBS’s reputation as a well-oiled wealth management machine. It is also true that the US Internal Revenue Service appears to be focused on UBS’s private bank above all others. The IRS has lodged a case in a Miami court that UBS should hand over the names of 52,000 accounts as part of US administration attempts to combat tax evasion.

Such “fishing expeditions” are not permitted under the Organisation for Economic Co-operation and Development’s rules. They have also prompted the Swiss government to enter the fray. In a brief filed in Miami, it argues that such a unilateral request for blanket disclosure risks overturning the increased information-sharing it has agreed with the US when fraud and evasion is suspected. It adds that for UBS to provide such information is against Swiss law. This bolsters UBS’s case. But it also shows how the destinies of Switzerland Limited and all its banks are now shared.

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