ZURICH (Reuters) - UBS UBSN.VX needs an investment bank to serve its wealthy clients, the Swiss bank's new chairman was quoted as saying on Sunday, adding that he believed Germany would ultimately accept the terms of a withholding tax deal to solve a dispute over tax dodgers.
Last week, Axel Weber, formerly head of Germany's Bundesbank, was elected chairman of UBS, where private banking is a big focus of the business.
After UBS had to take state aid during the financial crisis and is now having to shore up capital to comply with tough new Swiss regulations, questions have arisen as to how large the investment bank needs to be.
"The area of securities and trading is important. It carries out client-orientated purchases and sales, such as when UBS restructures wealth management portfolios," Weber told the NZZ am Sonntag in an interview.
"We must keep this business under the direction of (investment bank head) Carsten Kengeter," he also said, echoing the strategy laid out by Chief Executive Sergio Ermotti in November.
Switzerland is embroiled in disputes with Germany and the United States over citizens of those countries who may have tried to dodge taxes by hiding money in secret Swiss bank accounts.
UBS was forced to pay a fine and release the names of 4,500 clients in 2009 to settle U.S. charges.
Germany and Switzerland last year agreed to tax secret offshore accounts and then in April toughened the terms of the deal after the Germany's Social Democrats (SPD) blocked the original accord, saying it was too lenient.
Yet the SPD insists the amendment is still not enough, while Switzerland says it cannot make further concessions.
Weber, a German citizen, told the newspaper he knew German Finance Minister Wolfgang Schaeuble well and that the minister would be able to convince German opponents of the deal to accept it.
"We need the tax deal to give us legal security," Weber said, adding that clients would place new money with UBS only when the dispute was settled.
Despite a tax deal being vital, Weber said Switzerland should make no further concessions: "Switzerland must now clearly signal, that the negotiations have been concluded."
In response to tough capital rules laid out by Swiss financial regulator FINMA after the financial crisis, UBS and rival Credit Suisse CSGN.VX are issuing loss-absorbing capital.
Due to concerns of shareholder dilution, however, and unlike Credit Suisse, UBS has not gone for so-called contingent convertible bonds that absorb losses by converting to equity.
"In coming months I will conduct an intensive dialogue with regulators and shareholders to push forward acceptance for raising new capital," Weber said.
Reporting by Catherine Bosley