Swiss private banking will undergo fundamental change during the next five years and banks unable to meet current challenges will be targeted by others, a study from management consultancy Accenture said.

The report, released on Thursday, said that as new competitors enter the market and large universal banks look to re-work business models, there will be more mergers and acquisitions among regional and private banks.

"Foreign banks will try to expand their footprint in the Swiss market. On the private banking side there is a huge interest in buying into Switzerland," said George Schmidt, a financial services partner at Accenture.

"Another reason that mergers and acquisitions activity will increase is that many smaller and regional banks are too small to handle new market challenges," he said.

Swiss private banks have been closely watched during the last year.

Under pressure from the Group of 20 nations the country has made significant concessions on its bank secrecy.

A protracted tax row between UBS and U.S. authorities further shook the industry, and a theft of client data at HSBC's Swiss unit also put Swiss banks' reputation for security in doubt.

Schmidt said trust and security will remain top client priorities beyond the financial crisis. Private banks will need to distinguish themselves from others to ensure client loyalty, perhaps by improving product and service offerings, he said.

Bankers questioned in the report said they expect regulation to increase, but believe the Switzerland will retain its leading financial position internationally.

"Switzerland is definitely still a place to be and will continue to be a key financial center," said Schmidt, citing the country's depth of private banking advisory culture, as one of the country's major assets, along with the stability and reputation of Swiss banking.

The major growth driver will be an expanding client base in Asia, South America and Eastern Europe, while a shrinking clientele in the developed markets could be a drag on growth.

"All banks in Europe and offshore locations have the issue of still existing undeclared assets. Banks all want clients who are tax compliant, and are trying to help them to get there," Schmidt said.

Schmidt said banks believe products will be less complex and more geared to fulfilling client needs.

"Banks will look to sell advice to their clients, rather than pushing products," he said. "Banks have all the interest to win back their clients' trust, and clients want more transparency."