Switzerland once had immense pride in its strict banking secrecy laws, but now they have become a major international liability.
Switzerland was proud of its banking secrecy but is now under pressure
Notorious Swiss banking secrecy laws are to be circumvented as part of a resolution to a long-running battle with US officials over tax evasion.
The Swiss government said it will let banks circumvent strict client secrecy laws as part of the effort.
Finance minister Eveline Widmer-Schlumpf said that Switzerland is acting because US patience is running out with the country's banks suspected of aiding American tax cheats.
The aim, she said, is to "restore stability" to the Swiss banking industry.
The banks will decide for themselves if they want to negotiate with US authorities to settle legal disputes over suspected American tax evaders.
Calling it a pragmatic solution, Ms Widmer-Schlumpf acknowledged the talks with American negotiators have been difficult but said that Switzerland wanted to avoid a retroactive law.
The deal was agreed to by the Swiss Cabinet and will go to parliament for approval later this year.
She declined to provide further details of the agreement, but dismissed reports that the Swiss government will pay billions of dollars upfront to cover fines the country's banks can expect to receive from US authorities.
In a statement, the Cabinet said it "wants to create the legal basis for resolving the tax dispute with the United States" by enabling banks to make their own agreements with the US justice department.
"The solution chosen will allow legal closure to be achieved without having to enact new legislation with retroactive effect or indeed applying emergency law," the statement said.
Banks that cooperate with US authorities, it added, would be obliged to provide maximum protection for their employees against discrimination or dismissal.
UBS agreed to pay $780m (£515m) to the US in 2009 over secret accounts held by Americans.
The country's oldest bank, Wegelin, which was established in 1741, agreed to pay a fine last January over similar secret accounts.
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