UBS AG will not sue its former bosses after risky bets on subprime mortgages and a strategy of helping U.S. clients dodge taxes by hiding money in secret accounts brought the Swiss bank to its knees.

Zurich state prosecutors also said they would not open criminal proceedings against UBS employees as there was no evidence of a breach of Swiss law.

UBS said bringing charges would only draw negative attention as the wealth management group seeks a fresh start to win back trust after massive withdrawals by rich clients.

The board has decided that years of uncertainty about these matters due to litigation ... and related negative attention from such action is not in the interest of UBS, its employees, clients and shareholders, the group said in a statement.

UBS said the board had decided not to take action after a thorough review, including consultation with external legal experts. It said its new management led by banking veteran Oswald Gruebel had taken comprehensive and profound measures to ensure that nothing like this should ever happen again.

UBS shares were up 1.33 percent at 16.04 Swiss francs at 1401 GMT (9:01 a.m. EST), against a 1.3 percent weaker DJ Stoxx European banks index <.SX7P>.

Earlier this year, The world's No. 2 wealth manager, with $1.7 trillion in assets and the leader in the super-wealthy sector, appointed Gruebel as chief executive and Kaspar Villiger as new chairman to try to turn the page.

STATE RESCUE REQUIRED

Public anger over UBS's problems has focused on former chairman Marcel Ospel, who quit in April 2008 after being blamed for the aggressive risk-taking strategy in the United States which brought the Swiss bank near to collapse.

Ultimately Switzerland had to rescue its flagship bank last year after it made $52 billion writedowns in the subprime crisis.

In August, the Swiss Social Democrat party asked a judge to investigate whether Ospel and his successor as chairman Peter Kurer were aware of tax fraud on behalf of the banks' U.S. clients. Kurer, who was replaced by Villiger this April, dismissed the allegations as unfounded.

Ospel and other ex-board members agreed last year to return 33 million Swiss francs ($32 million) in payments from the bank after a media campaign against excessive bonuses, but UBS said the move should not be seen as an admission of guilt.

The other executives who returned payments were former Deputy Chairman Stephan Haeringer and former Chief Financial Officer Marco Suter.

UBS said on Tuesday its review concluded that there was no evidence of criminal conduct by former senior executives under Swiss law. Furthermore, there is no indication that they pursued personal interests to the detriment of UBS.

Zurich prosecutors said in a separate statement their investigation had not found evidence that UBS executives were aware they were taking unacceptable risks.

No criminal investigation will be opened without any new evidence due to a lack of suspicion of criminal behavior under Swiss law, they said, adding they would continue to follow developments and report back when it has concluded monitoring.

Prosecutors noted that in April they had said that helping U.S. clients dodge taxes or forge documents at the expense of U.S. tax authorities was not an offence under Swiss law.

A criminal probe was launched in the United States, however, and that was eventually settled with a hefty $780 million fine.

Bowing to global pressure on tax havens, Switzerland also pledged in March to relax its bank secrecy laws and improve cooperation with foreign tax authorities.

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