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* Applies to banks not yet under U.S. investigation
* Banks to pay penalties, disclose information
* Swiss bankers' body sees fines at upper end of acceptable
By Patrick Temple-West and Katharina Bart
WASHINGTON/BERN, Aug 30 (Reuters) - The United States andSwitzerland have struck a deal to allow some Swiss banks to payfines to avoid or defer prosecution over tax evasion by theirU.S. customers, moving closer towards ending a long-runningdispute.
The deal will apply to about 100 second-tier Swiss banks,which could have to disclose some previously hidden informationand face penalties of up to 50 percent of assets they managed onbehalf of wealthy Americans.
But it does not cover banks already under U.S. criminalinvestigation, which include some of Switzerland's biggest bankssuch as Credit Suisse and Julius Baer.
The deal is a step forward in a long-running U.S. drive topierce the shroud of Swiss bank secrecy, though analysts said itwas too early to say how much the Swiss banks would have to payor how much extra revenue would flow to the United States.
"On the whole it's a pretty strong agreement," said HeatherLowe, director of government affairs at anti-graft watchdogGlobal Financial Integrity, though she said there were "gaps",such as whether banks could settle without turning over U.S.client names. "That is definitely one open question here."
Swiss privacy laws have helped to make the Alpine countrythe world's biggest offshore financial centre. But a crackdownon tax evasion by U.S. authorities in particular had led it tothe negotiating table in a bid to lift the uncertainty overpotential fines and even indictments for its banks.
UBS, Switzerland's biggest bank, reached alandmark $780 million settlement with U.S. authorities in 2009after admitting it sheltered U.S. tax cheats, providinginformation that has contributed to a criminal investigationcurrently focused on 14 other banks.
Switzerland's oldest bank, Wegelin & Co, was indictedearlier this year and announced its closure, underscoring therisks for Swiss financial institutions.
"It's a choice between two evils (for Swiss banks)," saidWalter Boss, a tax lawyer with Poledna Boss Kurer AG in Zurich.
"If they don't cooperate with the U.S., the U.S. mightindict them."
PENALTIES
U.S. Attorney General Eric Holder hailed Thursday's deal:"The programme's requirement that Swiss banks provide detailedaccount information will improve our ability to bring taxdollars back to the U.S. Treasury from across the globe."
The Swiss government, meanwhile, said the settlementprovided a framework for cooperation while respectingSwitzerland's legal system and sovereignty.
Under the programme's penalty provisions, a Swiss bankseeking a non-prosecution agreement must agree to a penaltyequal to 20 percent of the total dollar amount of all hiddenU.S. customer accounts held by the bank on Aug. 1, 2008.
That was roughly when the United States started crackingdown on tax avoidance by Americans with secret Swiss accounts.
The penalty amount increases to 30 percent and then to 50percent, depending on how active a bank was in continuing toopen secret accounts for Americans after the crackdown began.
"The fines in particular are at the upper end of legallyacceptable and economically bearable levels," the Swiss BankersAssociation (SBA) said in a statement.
"It is, however, the sole remaining solution for enablingthe banks to resolve the legal problems with the U.S.conclusively, and for creating legal certainty."
The SBA also flagged what it called "certain ambiguities inthe programme" which would need to be discussed between the U.S.Justice Department and the banks to enable the banks toimplement the programme.
The programme, which is not available to individuals, alsorequires cooperating banks to tell prosecutors about Americans'assets that left Switzerland and were moved to other tax havens.
The Swiss government did not give any information about thebanks still under U.S. investigation, which also include theSwiss arm of Britain's HSBC, privately held Pictet, andstate-backed regional banks Zuercher Kantonalbank and BaslerKantonalbank.
Several of these banks have said they are preparinginformation on client withdrawals as demanded by U.S.investigators, after the Swiss government said it would allowthem to circumvent secrecy and privacy laws to do so.
At 0950 GMT, Credit Suisse shares were down 1.2 percent at27.01 Swiss francs, with Julius Baer's down 0.9 percent at 41.32francs. The European bank index was off 0.3 percent.
