Julius Bär told AFP it was being sued by Germany for 110 million francs ($120 million), plus interest, over allegations a bank it later bought had allowed cash to be withdrawn illegally.
"The bank denies the claim and has taken measures to protect its interests," spokesman Jan Vonder Muehll said in an email, adding that the bank had informed shareholders of the lawsuit in its last earnings report.
Since East and West Germany were reunified in 1990, the country has launched dozens of lawsuits in various jurisdictions to try to recover money stashed by the former regime.
German authorities filed the suit with a Zurich court last week charging that Cantrade, a bank bought by Julius Bär in 2005, had not stopped a former top East German official from illegally taking money.
Vonder Muehll insisted, however, that Switzerland's largest bank UBS, which sold Cantrade to Julius Bär, should answer the accusations.
The charges centre around colourful Austrian communist Rudolfine Steindling, who headed up East German trading company, Novum.
She transferred the money to several Swiss banks, including Cantrade, and withdrew the cash after the fall of the Berlin Wall.
Germany argues Steindling had no right to the cash, which was amassed by East Germany from fees charged to Western firms, and maintains the Swiss banks should have known that.
German authorities have already successfully sued another Swiss bank, a branch of Bank Austria, itself now part of Italy's UniCredit, in the same case.
That bank was ordered by Switzerland's top court last year to cough up €254 million ($337 million) in compensation for allowing Steindling to withdraw cash.
Steindling, who died in Israel in 2012 and was known to have a penchant for Chanel suits, never revealed what she had done with the money.