The US and Switzerland have signed an accord which will allow Swiss banks to cooperate with US authorities, enabling them to avoid or defer prosecutions arising from a long running dispute over offshore tax evasion.

The agreement was signed in Washington this week by the Swiss Ambassador and representatives of the US Department of Justice (DoJ) and sets out a framework for resolving the dispute, which over the past five years has seen UBS face a $780m (£502m) fine, with a $74m (£47m) penalty for Switzerland's oldest private bank, Wegelin.

The settlement programme will apply to about 100 second-tier Swiss banks, provided they agree to disclose certain previous hidden assets of US customers. They have until the end of the year to request a non-prosecution agreement from the US authorities.

Eligible banks will face penalties and be required to disclose account information about US customers in order to avoid prosecution, the DoJ said. Fourteen Swiss banks already under investigation by US prosecutors are excluded from the accord, and the programme is not available to individuals.

The DoJ indicated that a Swiss bank seeking a non-prosecution agreement must agree to a penalty equal to 20% of the total dollar amount of all hidden US customer accounts held by the bank on 1 August 2008. That amount will increase to 30% and then 50%, depending on how active a bank was in continuing to open secret accounts for Americans after the US authorities began their crackdown. Estimates of the total penalties paid by banks suggest the figure could be close to a billion dollars.

The Swiss Bankers Association (SBA) welcomed the agreement, saying it 'enables all banks in Switzerland to settle their US past quickly and conclusively and creates the necessary legal certainty.'