Geneva  - Shares in UBS tumbled badly Friday, a day after the United States authorities issued a lawsuit against the bank demanding that it hand over about 52,000 names of clients.

At one point in early morning trading the stocks dropped 17 per cent, and ultimately closed the day at 11 Swiss francs, down 14 per cent from its opening price.

The bank, the largest in Switzerland, said it would challenge the US lawsuit.

"UBS believes it has substantial defenses to the enforcement of the John Doe summons and intends to vigorously contest the enforcement of the summons in the civil proceeding," the bank said in a statement.

The lawsuit was filed a day after UBS said it would pay a hefty fine of some 780 million dollars and hand over the names of around 250 clients who allegedly committed tax fraud.

UBS had handed over those names as the allegations are of deliberate criminal acts, but said the other thousands of clients would still be protected under Swiss laws.

Swiss Finance Minister Hans-Rudolf Merz said Thursday that the country's laws on banking secrecy would remain intact, but bankers were not calmed.

The Swiss media saw the events as US putting unfair pressure on Switzerland, with some outlets calling it outright "blackmail," though at least one newspaper, the Geneva based Le Temps, said UBS's mistakes in recent years were forcing changes in the country.

The bank was bailed out last year by the government to the tune of about 58 billion dollars.

Also, economy watchers were worried European nations would try to take advantage and get information the Swiss have been keeping locked away.

There was concern that the prize asset of secret banking was being eroded and that eventually the country's financial sector, a backbone of the economy, would be hit hard, leading to job losses and dwindling income.

UBS is accused of willfully helping wealthy US clients commit fraud.

The drop in stocks comes a week after both UBS and Credit Suisse, the second-largest Swiss bank, reported huge fourth- quarter losses.

UBS's 2008 losses amounted to more than 19.6 billion francs. It has announced job cuts and taken a bailout from the Swiss government.

Friday's stocks tumble went beyond UBS, though. Credit Suisse dropped 9 per cent and other banks also fell. Analysts said this was due to concern for the whole sector. dpa