Switzerland is to process a request by the United States for details of an estimated 4,450 American accounts of Swiss bank UBS to end a tax dispute between the two countries.
The process will be governed by the existing tax treaty between Bern and Washington, according to the text of an agreement signed in Washington on Wednesday.
US tax authorities have been seeking the confidential details of up to 52,000 clients suspected of cheating the US tax system. The out-of-court settlement saves what had been seen as a long, damaging and costly court case.
UBS said in a statement that the agreement does not call for any payment and the parties would file a stipulation with the appropriate court in Miami dismissing enforcement action against the bank.
Under the terms of the accord, Switzerland is to establish a special task force enabling the Swiss federal tax authorities to speed up the process.
This will involve about 30 specialists from an audit firm and around 40 lawyers and tax specialists recruited from the federal authorities.
The first 500 decisions are to be taken within 90 days of a request being made, while the remainder will be made no later than 360 days after a demand has been put forward.
The deal will give the US Internal Revenue Service thousands of long-sought account names, and is expected to provide even more UBS clients who voluntarily disclose their financial details to the agency, IRS Commissioner Doug Shulman said.
The IRS chief said the 4,450 accounts being relinquished to the agency were the ones most suspected of containing undeclared assets.
"I believe this agreement gives us what we wanted - access to information about those UBS accountholders most likely to have been involved in offshore tax evasion."
A Swiss government statement said the privacy of all the persons concerned remained protected under law, and they had the right to contest the tax authorities' decisions before the Federal Administrative Court.
Swiss Justice Minister Eveline Widmer-Schlumpf told a news conference in Bern that the deal lifted the threat of criminal prosecution against UBS, which could have endangered the bank's existence and dealt a severe blow to the economy.
"There was no alternative to this solution," she said.
At the same time, Finance Minister Hans-Rudolf Merz said the costs related to the UBS case could reach SFr40 million ($37.2 million), although he commented that precise costs were not yet known.
In other reaction, the Swiss Bankers Association said it "welcomed" the fact that the US and Switzerland had been able to find an out-of-court solution and found the details of the agreement "convincing".
UBS can now continue its consolidation process in an atmosphere free of "this legal uncertainty", it said in a statement.
It added: "The solution found conforms entirely with prevailing Swiss law. This is of crucial importance for the Swiss financial centre because international clients rely very much on the predictability and stability of the Swiss legal system."
In a separate agreement with the US Internal Revenue Service, UBS has committed itself to comply with the Swiss tax authorities on account information within certain time frames.
UBS will also pledge to continue its support for the IRS voluntary compliance practice.
The Swiss justice ministry is to seek assistance from the Swiss Financial Market Supervisory Authority and will oversee UBS's "strict compliance" with the commitments.
The accord also stipulates that the Swiss tax authorities, the Federal Justice Office and the IRS will meet UBS on a quarterly basis to assess the progress of the process.
Another part of the agreement says Switzerland will be prepared to review and process additional requests for information by the IRS under an article of the existing tax treaty "if they are based on a pattern of facts and circumstances" that are equivalent to those of the UBS case.
swissinfo.ch and agencies
UBS is the world's number two wealth manager by managed assets and Switzerland's second largest bank.
It has a workforce of more than 76,000 worldwide, including nearly 30,000 in the US.
In February UBS paid a $780 million fine and given information on 255 clients after admitting that some of its bank employees had helped US citizens evade taxes.
UBS, which benefited from a multi-billion bailout package by the government, posted a record loss in 2008.
UBS and the US
On May 14, 2008, former UBS employee Bradley Birkenfeld and a Liechtenstein businessman were charged by the US authorities with helping an American billionaire avoid paying taxes on $200 million of assets deposited in Swiss and Liechtenstein bank accounts.
Birkenfeld turned whistleblower, giving details of UBS private banking practices to US prosecutors.
In July, a Miami court authorised the Internal Revenue Service to issue a summons on UBS demanding the release of confidential information on clients the agency suspected of tax evasion.
In the same month, UBS told a congressional hearing that it would stop offshore banking activities for US clients.
UBS agreed in February to pay $780 million and name some United States clients to resolve criminal fraud charges against it. However, this did not affect a separate demand from the IRS for the details of 52,000 UBS clients, in direct contravention of Swiss banking secrecy laws.