UPDATE 2-Swiss parliament nears deal on U.S. tax deal impasse

* Swiss vote could lessen opposition to UBS tax deal

* No plan B if parliament votes against deal – finmin

* Parliament also to vote on ‘too big to fail’ measures

* Measures would make it easier to split up failing banks

(Adds Social Democrat, finance minister, analyst and UBS
comments)

By Jason Rhodes and Catherine Bosley

BERNE/ZURICH, May 12 (BestGrowthStock) – Switzerland’s government
agreed to hold a vote on curbing bankers’ bonuses on Wednesday,
which could resolve a deadlock on handing over names of tax
evaders with UBS accounts to U.S. tax authorities.

The vote by Swiss parliamentarians on measures to curb
banker bonuses could finally put to rest a long and bitter tax
U.S. tax fraud probe for UBS (UBSN.VX: ) (UBS.N: ), the world’s
second-largest wealth manager, as it struggles to recover from
the banking crisis.

“It would be clever if we could solve this problem with the
United States. We have enough other problems. We have an
important partner for our economy, for our society, who’s worth
keeping such agreements for,” said Swiss Finance Minister
Hans-Rudolf Merz.

He added that there was no back-up plan if politicians voted
against sealing a legal loophole that is stopping Switzerland
from handing over the data to U.S. tax officials.

Berne agreed in last year to hand over to U.S. tax officials
the names of 4,450 tax evaders holding secret accounts with UBS,
piercing a hole in the country’s famed bank secrecy laws.

But a Swiss administrative court blocked the data transfer,
forcing the Swiss government to tweak the settlement, which
needs parliament approval to become effective.

The Social Democrats, who could make-or-break UBS’s tax deal
with the United States in the parliamentary vote, have insisted
the government acts decisively curb bankers’ pay, or face
possible defeat in the critical UBS vote.

“There’s lots of political discussions now but I believe it
will go through the parliament, because it’s a question of
Switzerland’s reputation,” said analyst Teresa Nielsen at Swiss
brokerage Vontobel.

“If it doesn’t get solved this way it could be escalated to
become an international trial between the U.S. and Switzerland.”

UBS declined to comment.
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Reuters Special Report on UBS [ID:nN06239541]
UBS asset trends graphic: http://r.reuters.com/kep52k
Timeline: [ID:nLDE64B2LI]
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FURTHER CURBS ON BANKS

The government said it would prepare proposals to restrict
variable pay and also change the way that bonus payments were
taxed, as announced in April. It also laid plans for legislation
to prevent large banks from dragging down the entire economy if
they were to become insolvent. [ID:nLDE63R118]

The Social Democrats have said they would only vote for the
deal if the government gave definite guarantees on new bills on
bonuses and the ‘too big to fail’ issue, but the party warned on
Wednesday that the latest proposals did not go far enough.

Economy Minister Doris Leuthard also said last week there
was no plan ‘B’. [ID:nLDE64615M]

Switzerland has led the global push for stricter bank rules
after it had to bail out UBS, whose risky bets led to more than
$50 billion in write downs and huge losses.

Large bankers’ bonuses have also angered Swiss voters since
the bailout, notably when UBS issued large pay cheques to some
of its top bankers despite posting its second consecutive annual
loss in 2009. [ID:nLDE63D0E6]

“The risks of systemically important banks should be
restricted, as more stringent capital, liquidity and risk
diversification requirements will be set out in the Banking
Act,” the government said.

A government commission said last month that UBS and Credit
Suisse (CSGN.VX: ) should change their structure so they could be
broken up in the event of an insolvency, thereby limiting the
risk to the Swiss economy. [ID:nLDE63L1FD]

“Measures in the area of organisation should make it
possible to ensure that systemically important functions are
maintained without an entire institution having to be rescued by
the State,” the government said on Wednesday.

The measures could be adopted by the government by the end
of 2010 and come into force by Jan. 1, 2012, given swift
consideration by parliament.

Stock Market Money

(Additional reporting by Katie Reid; Editing Reed Stevenson)

UPDATE 2-Swiss parliament nears deal on U.S. tax deal impasse