March 4 (Bloomberg) -- UBS AG, Switzerland’s largest bank, nominated former Finance Minister Kaspar Villiger as chairman of its board of directors, replacing Peter Kurer after one year amid a probe into whether it helped wealthy Americans evade taxes.

Kurer’s departure comes less than a week after UBS called former Credit Suisse Group AG Chief Executive Officer Oswald Gruebel, 65, out of retirement to replace CEO Marcel Rohner. Villiger, 68, will step down from board positions at Swiss Reinsurance Co, Nestle SA and Neue Zuercher Zeitung if elected by shareholders on April 15, the Zurich-based bank said today.

UBS is being sued by the U.S. over the names of as many as 52,000 clients, after agreeing last month to hand out details of a few hundred customers to avoid prosecution on a charge that it helped rich Americans dodge taxes. The bank is cutting 11,000 jobs after more than $50 billion in losses from the credit crisis and clients withdrew $195 billion of assets last year.

“This is a clean slate,” said Christian Stark, an analyst at Credit Agricole Cheuvreux in Zurich who has an “underperform” rating on the stock. “Villiger hasn’t got the banking experience, but his political background may be useful in dealing with the U.S. and European Union.”

UBS rose 34 centimes, or 3.4 percent, to 10.23 francs in Swiss trading. The bank has lost 84 percent of its market value in the past two years and posted the biggest ever loss by a Swiss company earlier this year.

‘Mistakes’

Kurer, UBS’s former general counsel, and Rohner, the former head of the unit that’s under pressure in the U.S., quit after UBS admitted it made “mistakes” by helping clients evade U.S. taxes between 2000 and 2007. UBS has denied allegations in some Swiss newspapers that Kurer and Rohner knew of structures aimed at defrauding the U.S.

Mark Branson, chief financial officer of UBS Wealth Management & Swiss Bank, will testify today before the U.S. Senate’s Committee on Homeland Security and Governmental Affairs in Washington, which is crafting anti-tax haven legislation.

“Given the damage UBS has suffered internationally and domestically in the Swiss public discussion, a person with Villiger’s experience is ideal,” said Gerold Buehrer, head of the economiesuisse industry lobby who has known Villiger since 1991. “They needed a personality who can play the role of foreign minister.”

Bank Secrecy

The U.S. lawsuit and threats by European leaders to add Switzerland to a list of “uncooperative” tax havens have forced the government to offer concessions on the bank secrecy law that helped the country become the world’s biggest manager of offshore wealth. Switzerland will evaluate whether to treat “gross” tax evasion the same as tax fraud, Justice Minister Eveline Widmer- Schlumpf said this week after meetings in Washington.

“Banking secrecy has evolved and will continue to develop,” though it won’t disappear, Villiger told reporters at a press conference in Zurich.

A member of the pro-business Free Democratic Party, Villiger was in the government from 1989 to 2003 and served as finance minister for the last eight years of that period. During that time, Switzerland enacted legislation against money laundering and agreed to a European Union plan on the taxation of savings income, aimed at cracking down on investors who evade taxes.

In 1995 he became the first government member to apologize for Switzerland’s refugee policy during World War II, when the country turned away thousands of Jews at the border. He was finance minister when UBS and Credit Suisse agreed in 1998 to pay $1.25 billion to Holocaust survivors to settle claims that the banks withheld assets belonging to victims of Hitler’s genocide and helped the Nazis profit from looted gold.

Cigars, Bicycles

Villiger and former UBS Chairman Marcel Ospel argued in public in 2001 over who was to blame for holding up a financial bailout of Swissair Group. A 2006 film about the failure of the airline portrays Villiger fuming with rage as he tries to reach Ospel to demand emergency funding in the critical hours before the airline stopped flying on Oct. 2, 2001.

The son of an affluent cigar-producer, Villiger took over the factory at age 25 after his father died. He expanded the family business by buying a bicycle factory, and headed both companies with his brother until he gave them up to focus on politics after he was elected to the government in 1989.

“This is a fantastic change,” said Teresa Nielsen, an analyst at Bank Vontobel in Zurich. “Villiger has credibility because he’s been working on anti-money laundering laws in Switzerland and this should give UBS the room to rebuild its reputation. Both Kurer and Rohner have been involved in the U.S. tax investigation.”

Transition

Kurer, who joined UBS in 2001 from Zurich-based law firm Homburger AG, had been under pressure from investors including former UBS President Luqman Arnold, who said he lacked experience in running a bank. Arnold, in an interview with Bilanz, said last month Kurer made “enormous changes” and he has “a lot of respect” for the executive’s achievements.

Kurer wouldn’t have been on the candidate list to replace former Chairman Marcel Ospel if the bank had had more time to find a successor, deputy Chairman Sergio Marchionne told Swiss magazine Bilanz last year.

“I accepted the position of chairman out of my sense of responsibility for the bank, its shareholders, clients, staff and the communities in which we work,” Kurer said in the statement. With Gruebel in place as CEO “it is time to complete this transition and leave the office at the end of my one-year term.”

-- With reporting by Eric Burg in London, Simone Meier in Frankfurt, and Reto Gregori in New York. Editor: Christian Baumgaertel, Frank Connelly.

To contact the reporter on this story: Warren Giles in Geneva at wgiles@bloomberg.netChristian Baumgaertel at cbaumgaertel@bloomberg.net

Last Updated: March 4, 2009 13:58 EST