US District Judge Jed Rakoff told a federal court in Manhattan that US prosecutors should enlist the help of diplomatic authorities, including perhaps the State Department, to advance the case surrounding what was once Switzerland’s oldest bank. It was founded in 1741 and run as a private partnership, with several partners operating under unlimited liability.

Wegelin is accused of helping clients hide more than $1.2 billion in offshore bank accounts.

The US is carrying out a criminal probe into 11 Swiss and Swiss-style banks, including Wegelin; they are suspected of selling offshore tax evasion services to tens of thousands of wealthy US citizens. Inquiries, growing out of scrutiny of UBS, are focused on Credit Suisse and Basler Kantonalbank among others.

The non-US parts of Wegelin have been sold into Notenstein Private Bank, a structure created by Swiss-based Raiffeisen, in a move described by the partners of Wegelin as “extremely painful”. The sale is the most dramatic example yet of how the US authorities’ reach is forcing foreign firms to make significant moves to avoid falling foul of US law.

"Occasionally in these situations, progress is made through diplomatic channels," Rakoff told Assistant US Attorney Daniel Levy at the hearing. "Unlike an individual, arresting a company is somewhat difficult, other than in science fiction," a report by Reuters said.

Rakoff spoke after Levy said "we have no proposal" for how to get Wegelin to formally answer the charge, reports said.

In a statement, Wegelin said it has not been served with a criminal summons and therefore was not required to appear in court.

"The circumstances create a clear dilemma for Wegelin & Co," it said. "If it were to adhere to current US legal practice aimed at Swiss banks, it would have to breach Swiss law."

The bank was charged on 2 February after bringing conspiracy charges against three bankers in its Zurich branch: Michael Berlinka, Urs Frei and Roger Keller. More than 100 US taxpayers conspired with the defendants and other conspirators between 2002 and 2011 to hide money from the Internal Revenue Service, prosecutors said.