Is Swiss secrecy over?

YES. At least for US clients, the end is year. UBS one of the biggest casualties of the US subprime crisis, faces an additional blow to its profitability after a decision to wind down its traditional Switzerland-based private banking business for rich US clients.

The move by the world’s biggest wealth manager follows a reassessment of the risks and rewards from an activity that has drawn increasing attention from US regulators, especially the IRS. Governemnts have been putting pressure because of the fear that they are loosing revenue.

Profitability for the US business is not disclosed. However, private banking is one of UBS’s most lucrative activities and the bank enjoys among the highest margins of top international wealth managers. In 2006, private banking accounted for SFr5.8bn ($5.3bn) of the group’s total pre-tax profit of SFr14.4bn.

UBS’s decision, announced internally in late November but only confirmed publicly on Wednesday, follows the earlier termination of business with Iran. The moves are unconnected but reflect rising reputational concerns at a group that employs about a quarter of its staff in the US.

About 60 private bankers in Zurich, Geneva and Lugano are affected. A few might transfer to UBS Swiss Financial Advisers, a Zurich subsidiary created specially to meet US regulatory requirements, but not enjoying Swiss banking secrecy on securities transactions.

“We are talking to lots of people. It is clear there has been a rather exceptional situation over the past three to four months,” said an executive at Impact Partners, a Geneva executive search company dealing with some of the UBS staff affected.

Employees declined to comment, for fear of breaching internal guidelines or Swiss bank secrecy law. But former staff have described falling morale and conflicts between ambitious internal growth targets and ever-tighter compliance rules.

“This strategic alignment brings our services closer to the clients, streamlines operations and enhances our ability to en­sure compliance with applicable laws and regulations,” said UBS.

However, where UBS will not be, some small Aisle will step in a provide clients numbered accounts. The service will fall back into the shadows, where it began and continue -- just this time it will stay behind closed doors.