With Switzerland under renewed pressure from the OECD and European Union to change its banking and tax laws, Urs Roth, the Swiss Bankers Association's second highest official, defended Swiss legislation which classes tax evasion as an administrative rather than a criminal offense, meaning that Switzerland is not obliged to provide judicial assistance to other countries in such cases.

"Tax evasion is no trifling offense, but it's not a capital crime either," Roth was quoted as observing.

According to the report, foreigners have deposited an estimated CHF1 trillion Swiss francs (USD950 billion) in Swiss banks. But by eliminating the distinction between tax evasion and fraud - which is a criminal offense in Switzerland - and by diluting banking confidentiality laws, Roth and other Swiss bankers argue that the country's reputation as one of the best financial centres would be damaged, perhaps irreparably.

One Swiss banker who has suggested that the current crackdown on banking secrecy and offshore tax evasion could change the face of the Swiss banking industry is HSBC Private Banking (Suisse) Chief Executive Peter Braunwalder, who last week announced that he would be retiring in October 2008.

"I think it's time to leave the industry... when governments buy stolen goods to basically get their way through," he was quoted as observing by AFP, referring to the sale of a computer disc to the German intelligence service by an ex-employee of Liechtenstein bank LGT, containing names of clients of the bank's trust services business.

"I see this industry becoming more and more difficult...the German government is doing things that shock me," he reportedly added.

Another Swiss banker who has been fiercely critical of the German government's actions is Pierre Mirabaud, the head of the Swiss Bankers Association, who was forced to apologise after comparing the tactics used by the German authorities to obtain information for their tax evasion investigation to "methods worthy of the Gestapo" whilst speaking on Switzerland's French language broadcaster last month.

Mirabaud stated at the time that he did not expect the German tax evasion probe to be extended to Switzerland, although the AFP has reported that a former employee of Swiss private bank Julius Baer handed over confidential data on German clients to tax authorities in Germany as long ago as April 2007.

Meanwhile, Swiss bank Vontobel has moved to fend off pressure from Germany to throw open its books, after rumours that its Liechtenstein client base had been leaked to the German authorities.

"Various media have reported on the possible involvement of clients of Vontobel Treuhand AG, Liechtenstein, in the German tax affair," the bank stated recently. However, it went on to add that:

"The German tax authorities are continuing to focus on client data from the records containing information for the period up to 2002 that are known to have been obtained unlawfully from a Liechtenstein-based financial institution. Vontobel Treuhand AG, Liechtenstein, wishes to confirm that none of its client data have been obtained unlawfully or used for improper purposes."