* Swiss cabinet met on UBS tax case Monday
* FinMin says talks stalled over procedure
* Won't use emergency law to force data handling to U.S.
* Swiss government says won't comment until tax talks over
(Add government official, details on procedure, background)
By Lisa Jucca
BERNE, Aug 10 (Reuters) - The Swiss cabinet held a special meeting on Monday to discuss a snag in talks to settle the U.S. tax evasion case hanging over bank UBS, the sternest ever challenge to Swiss bank secrecy rules.
The Swiss government, currently in recess, held an extraordinary meeting, an official said, but declined to give any detail until a final deal is done.
Switzerland and the United States failed on Friday to agree on a settlement that would spare UBS a tax trial, and talks will continue until Aug. 12, when a new status conference with U.S. Judge Alan Gold is scheduled.
The case has big implications not just for Switzerland, whose private banks manage around $2 trillion of foreign wealth, but for the entire offshore banking industry.
"My suspicion is that it is not good news. I'm sure there will be a resolution, but whether it will be as beneficial for UBS as the market was hoping is not looking likely," said Helvea bank analyst Peter Thorne.
Berne and Washington have said they have reached agreement on the main issues, and a settlement is expected to involve the disclosure of some of the names of the 52,000 U.S. clients holding secret Swiss accounts the U.S. authorities are seeking.
UBS shares, which have rallied in recent weeks on hopes of a deal, were down 0.4 percent at 16.28 Swiss francs at 1145 GMT, compared with a 0.9 percent weaker DJ Stoxx European Banking index.
"The settlement talks are now extending into a fifth week, underscoring its difficulties of designing a pact that could further erode Swiss banking-client secrecy," said Sarasin analyst Rainer Skierka.
Sarasin would keep its "neutral" rating on the stock in the meantime, he said.
LEGAL PROCEDURE
Swiss media have said U.S.-Swiss talks have stalled on legal details on how to allow the transfer of some client data to Washington while respecting Swiss bank secrecy laws.
"It is not a problem that has to do with UBS, but rather with the legal procedure," Finance Minister Hans-Rudolf Merz told Swiss television on Sunday, without going into details.
According to Swiss newspaper NZZ am Sonntag, the U.S. wants guarantees that the so-called administrative assistance process, the legal framework under which bank client details can be transferred to the United States, will deliver the data, and that it would do so quickly.
But Merz said on Sunday Switzerland was not prepared to introduce emergency measures to force the pace of the process.
Under the current system, bank clients have 30 days to appeal to the Swiss administrative court against a transfer of their data to a foreign authority, a court spokeswoman said.
A decision on whether or not data can be transferred can take at least three months, Christoph Bandli, who heads the Swiss administrative court, told a Swiss newspaper on Sunday.
Originally scheduled for July 13, the case against UBS is now set for court on Aug. 17, but if the parties choose to delay further, the next available date would be Sept. 21.
Berne already stretched its legal system in February when it forced UBS to quickly hand over 250 client names, bypassing the clients' appeals, in order to settle criminal charges that threatened the bank's survival.
UBS's clients are believed to include many Americans with European roots who inherited wealth hidden in Switzerland; well-travelled businesspeople who have received offshore compensation via Swiss accounts; and people whose main objective in opening such accounts was to avoid taxes. (Writing by Emma Thomasson and Lisa Jucca, editing by Will Waterman)