Switzerland's largest bank held its ground on Wednesday in a dispute with the U.S. government, refusing to disclose the names of tens of thousands of rich American clients suspected by U.S. authorities of using secret Swiss bank accounts to dodge U.S. taxes.

A senior executive for UBS AG said at a Senate hearing that the bank regrets breaking U.S. tax laws, but it does not intend to hand over the client names being sought in a U.S. Internal Revenue Service lawsuit.

UBS has now complied ... to the fullest extent possible without subjecting its employees to criminal prosecution in Switzerland, said Mark Branson, chief financial officer of UBS Global Wealth Management and Swiss Bank.

The hearing convened hours after UBS announced that Swiss politician Kaspar Villiger will replace Peter Kurer as its chairman, completing a top management clearout designed to drag the beleaguered bank out of its deepest ever crisis.

Kurer, who was the company's top legal advisor before replacing the discredited Marcel Ospel last year, will leave under a cloud after the bank's shares lost nearly 70 percent of their value under his stewardship.

We deeply regret our breaches of U.S. laws, Branson told the Senate Permanent Subcommittee on Investigations at a hearing focused on offshore tax havens.

He called for a diplomatic resolution, rather than protracted court proceedings, over the IRS efforts to get data from UBS on roughly 48,000 U.S. accounts, down from an earlier estimate of 52,000.

UBS last month acknowledged responsibility for helping U.S. clients conceal assets from the U.S. government. UBS also agreed to pay a $780 million fine, and to identify some U.S. clients, in a legal deal that resolved criminal fraud charges.

U.S. authorities, fearing that the agreement might yield very few names, then filed the civil lawsuit against UBS.

UBS argues that the information sought by the United States is protected by Swiss financial privacy laws. The IRS is attempting to resolve this diplomatic dispute in a courtroom, which is neither productive, nor proper, said Branson.

LEVIN FINDS ANSWERS EVASIVE

In a showdown that is threatening Switzerland's cherished tradition of banking secrecy, subcommittee chairman Senator Carl Levin grilled Branson over the bank's conduct and at one point became frustrated with his replies.

Your answers are needlessly evasive, it seems to me, Levin said to Branson during the hearing.

We have problems with your bank ... But we also have very serious problems with the Swiss secrecy laws, Levin said.

We may not be able to change your law but we're going to do everything we can to pass a law here ... I hope you'll take that message back to your bank, said the Michigan Democrat.

Separately, in a speech on Wednesday before a joint session of the U.S. Congress, British Prime Minister Gordon Brown called on world governments to outlaw offshore tax havens.

World leaders from the Group of 20 are set to gather in London next month, where they could add Switzerland to a blacklist of nations that foster tax cheats.

Levin's subcommittee has been probing offshore tax havens for years, taking aim sometimes at tax havens other than Switzerland, including Liechtenstein and the Cayman Islands.

Branson last testified before Levin in July. In that dramatic session, Branson apologized for UBS' activities and said the bank would cease offering cross-border private banking through its unregulated units to U.S.-domiciled customers.

Levin and Democratic colleagues this week introduced legislation into Congress to crack down on tax havens.

The Obama administration on Tuesday endorsed the bills filed in both the Senate and the House of Representatives.

Investors welcomed the change of UBS chairman, which follows last week's appointment of former Credit Suisse head Oswald Gruebel as chief executive, as a sign the bank could resolve its tax spat with the United States and restore its reputation as the trusted banker to the world's wealthy.

Shares of UBS ended up 4.2 percent at $8.70 by Wednesday's close on the New York Stock Exchange.

(Additional reporting by Sam Cage, Rupert Pretterklieber, Sven Egenter and Martin de Sa'Pinto; Editing by Tim Dobbyn)

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