The Swiss government is working on how to develop banking secrecy and is looking into the difference between tax evasion and tax fraud in Swiss law, Finance Minister Hans-Rudolf Merz told reporters.

Merz, who is also currently Swiss president, a largely ceremonial role, said Swiss banking secrecy was still intact and respected privacy rather than protected fraud.

"The Federal Council is currently considering the distinction between tax evasion and tax fraud," Merz told reporters, referring to a nuance of Swiss law many struggle to understand.

Under Swiss law, tax fraud is a criminal offence, whereas tax evasion is not.

The Swiss government has come under fire after allowing major bank UBS to disclose the identity of about 300 of its US clients to avert criminal charges that Swiss regulators said would have put its existence at risk and hurt the economy.

Switzerland, the world's biggest offshore financial centre, manages nearly a third of an estimated $7 trillion of offshore wealth. Bankers have warned the financial sector could shrink by up to a half without banking secrecy.

The country's justice minister, Eveline Widmer-Schlumpf, has already raised the prospect of changes to the distinction between tax evasion and fraud.

"In the discussions on the federal level and the expert commission, we will have to think about whether we should treat severe tax evasion like tax fraud," she said in a TV interview.

When asked whether this meant a crack in banking secrecy, Widmer-Schlumpf said: "No, not at all. Banking secrecy is about protecting people against an unjustified access to their bank data and their privacy." - Reuters