"Switzerland is not a banana republic," Patrick Odier, Chairman of the Swiss Bankers Association said during a press conference.
The banking group, comprised of 355 financial institutions, was reacting to Swiss media reports that US authorities had given Switzerland until Tuesday to transmit data from tax evaders in the United States who have stashed assets away in Swiss banks.
According to the weekly SonntagsZeitung, the United States has asked for detailed information on US nationals who have hidden their money in Switzerland, basing its report on a letter from the US deputy attorney general James Cole dated August 31, addressed to Swiss authorities.
The letter mentioned Switzerland's second biggest bank, Credit Suisse, as well as around another 10 banks, notably Julius Baer, Wegelin, and the cantonal banks of Zurich and Basel, the Sunday paper said.
US authorities want all data concerning private customers and US foundations which have deposited at least $50,000 (€35,300) in Switzerland between the period of 2002 and July 2010, it said.
When contacted by AFP, a spokesman with the Swiss Federal Department of Finance said that discussions were being held with the US on administrative assistance, but "we do not comment on the individual steps" of the talks.
He added that any data transfer would have to be done "on the basis of existing legislation", referring to the double taxation agreement reached with Switzerland in 2009, ratified by the Alpine nation but not by the US Congress.
The agreement specifies that information exchange would be on "individual cases where a specific and justified request has been made," according to the Department of Finance.
"The solution must be globally applicable, be definitive and correspond to existing Swiss law," Odier said.
"The approach adopted by the US public prosecutors is too tough and the past business conduct of some bankers might have been too careless," he said.
"The shadows of the past are closing in on us again," Odier added, saying Swiss banks would have to pay for any past transgressions in the US.
This latest request is not the first by US officials. Switzerland's biggest bank UBS was forced to disclose the names of 4,450 US clients for whom it had offered to conceal funds from the eyes of the US tax inspectors.
The bank paid a fine of $780 million to avoid losing its banking licence in the United States.
According to an anonymous banker quoted by SonntagsZeitung, Swiss banks risk a fine of around two billion Swiss francs ($2.5 billion) to settle this latest tax evasion affair.
But an analyst told AFP the fine "seems (like) a figure from thin air."
"Personally given all the problems, I would prefer the Swiss banks to completely abandon the US for private banking and think very seriously about investment banking as well," he said.
Analysts at Deutsche Bank said that Swiss banks would have to choose between refusing to cooperate with Washington or breach Swiss law.
Faced with these difficulties, coupled with eurozone debt fears, Swiss banks faired poorly in the local market. At 1520 GMT Credit Suisse plunged 8.13 percent to trade at 19.99 francs per share, Julius Baer was down 6.57 percent to 28.88 francs, and UBS fell 6.52 percent to 10.32 francs per share.