Swiss President Hans-Rudolf Merz told a news conference that he had talked with U.S. Treasury Secretary Timothy Geithner over the weekend about dropping a case against UBS over its tax shelters in return for signing a new tax treaty between the two nations.

“His answer was that he will reflect about this question, that he understands from his point of view that I was raising the question,” said Merz (pictured), according to Reuters. “He couldn’t of course answer immediately, but I felt that his bias was to study about that.”

UBS recently agreed to pay $780 million in fines, penalties, interest and restitution, and reveal the identities of approximately 300 U.S.-based clients who were using secret numbered Swiss bank accounts to hide their assets from the Internal Revenue Service (see UBS Agrees to Reveal U.S. Tax Shelter Clients).

However, the IRS has issued a series of “John Doe” summonses in an effort to force UBS to divulge the identities of another 52,000 U.S.-based clients, but UBS claimed that revealing such information would put it in violation of Swiss banking secrecy laws. Earlier this month, Switzerland agreed to begin sharing more tax information with the U.S., giving UBS a potential opening for working out a deal.

Merz wants to use the tax accord as a bargaining chip to ease pressure on the Swiss banking giant. While the Treasury Department would only confirm that Geithner listened to Merz’s concerns, Merz said he believed that Geithner had “acknowledged the suggestion in a positive way.” Merz added that Geithner appeared to be "understanding of the Swiss position" and that Geithner pledged to "look into it."

“I think Mr. Geithner is conscious of the fact that these criminal procedures that are taking place in the United States could be an obstacle to the political process of the double-taxation accords,” he told reporters. “This is why I proposed that the criminal proceedings be withdrawn at the time of signing of such an accord.”

However, the Treasury Department said that while Geithner understood Merz's concerns, the Justice Department and the IRS would independently decide whether to move ahead with the case.

One of the main goals of Merz's proposed deal is to give UBS some breathing space. “We’re of the opinion that the U.S. side should withdraw their charges,” said Merz. “We’d give U.S. authorities an easier access. In this situation, they should withdraw their charges.”

Negotiations with the U.S. government are scheduled to begin Tuesday in Bern, Switzerland. Meanwhile, UBS announced Monday that the head of its investment banking unit, Jerker Johansen, is stepping down. This is the fourth time the business has had a change in command in the past year and a half.

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