* Swiss banks suggest taxing earnings by foreign wealth
* Tax proposal would guard bank secrecy
* Proposal seen adding regulatory costs on banks
* Swiss managed assets up 3.6 pct in H1 but no new net money
By Lisa Jucca, European Wealth Management Correspondent
ZURICH, Sept 17 (Reuters) - Swiss bankers on Thursday called for the introduction of a broad withholding tax on earnings generated by foreign wealth to end international pressure on bank secrecy at a time when client inflows are flat.
Switzerland's treasured bank secrecy laws came under unprecedented attack by western nations in the wake of the financial crisis and Berne had to make wide concessions to avert international sanctions.
A U.S. tax probe of UBS this year also forced Berne and the Swiss banking giant to agree to disclose thousands of client names to end the litigation.
The powerful Swiss Bankers Association (SBA) said its proposal goes beyond an existing EU savings tax, a tax at source that is levied on the interest made on savings held by European Union citizens.
"The model would generate tax revenues while respecting the privacy of bank clients and it would represent an efficient alternative to a system of automatic information exchange," SBA Chief Executive Urs Roth told a press conference.
Roth said the tax system would cover dividends, income from collective investments and capital gains. It would apply to both private individuals and legal entities, and be broader than a planned new EU savings tax directive.
Under the plan, Swiss banks would apply the withholding tax equivalent to what is already in place in a client's country of origin and transfer the money to the tax authorities of that country.
Switzerland, the world's biggest offshore banking centre, is against automatically sharing bank client data with foreign tax authorities as it would kill its already weakened bank privacy laws. But it agreed in March to cooperate more on tax evasion with foreign governments.
NO NEW CLIENT MONEY
Assets managed by Swiss banks rose by 3.6 percent in the first six months of 2009 thanks to rally in stocks after the equities markets bottomed in March.
But overall the banks did not attract new net client money, with UBS continuing to experience client withdrawals, the SBA Banking Barometer for 2009 showed on Thursday.
"An estimate of the net change in new monies is difficult, but in the banks in Switzerland it is probably close to zero," the SBA report said.
Banks was managing 4 trillion Swiss francs ($3.9 trillion) in assets at the end of 2008, a quarter less than a year earlier.
The SBA's proposed system would guard bank secrecy but would create additional costs for Swiss banks, which are already facing more regulatory pressure due to the global financial crisis.
"(The system) will cost a lot, it is very complex but it is feasible," Roth said.
Swiss Foreign Minister Micheline Calmy-Rey told Reuters in March she favoured extending the EU savings tax directive to other countries outside the European Union.
Neither the bankers' proposal nor the EU savings tax directive addresses the issue of how to deal with untaxed capital brought into Switzerland by foreigners, it only covers income generated from such capital.
Last year Switzerland gave EU member states a total of 553.8 million Swiss francs in revenue generated by the savings tax. ($1=1.029 Swiss Franc) (Editing by Karen Foster)