* Swiss govt to stick to plans for capital rules
* Big banks will likely need Tier 1 capital of 10 pct
* Swiss hold national elections on Oct. 23
ZURICH, April 20 (Reuters) - The Swiss government looks set to push ahead with plans to make UBS UBSN.VX (UBS.N) and Credit Suisse (CSGN.VX) (CS.N) reach tough new capital standards despite warnings they could make the banks uncompetitive.
The Swiss cabinet, which operates on the basis of consensus and has already put out a draft law, is expected to announce its formal recommendation to parliament at a press conference on Wednesday.
The government is likely to stick to its main proposal: both big banks will need an equity Tier 1 capital ratio of at least 10 percent, versus the 7 percent minimum set under the Basel III global standards which begin to take effect in 2013. [ID:nLDE73D1EK]
Both UBS and the right-wing Swiss People's Party (SVP), which holds the most seats in parliament, have warned the plan risks making banks less competitive than foreign peers, raising questions about whether the rules might be watered down.
For a preview of the decision, click on [ID:nLDE73H10W]
Scenarios on Swiss political process [ID:nLDE73H117]
Factbox on proposed Swiss bank rules [ID:nLDE73H112]
Factbox on the various Swiss parties' views [ID:nLDE73H10X]
Factbox on Britain's proposed regulations [ID:nLDE73A0L9]
Switzerland is at the forefront of a global push to increase oversight of the financial industry after bailing out UBS during the financial crisis. UBS and Credit Suisse together have balance sheets more than twice the size of the economy.
Britain too is considering implementing capital standards more stringent than Basel III, though these would apply only to big retail banks. [ID:nLDE7371AX]
The laxer treatment of investment banks by Britain is providing further ammunition to those lobbying to lessen the so-called "Swiss Finish."
UBS Chief Executive Oswald Gruebel has said the stiff Swiss standards could force UBS to move units abroad. In contrast, Credit Suisse has termed the proposed standards "tough but doable."
The finance ministry hopes the matter will be voted on by the end of the year.
Yet with Switzerland gearing up for national elections on Oct. 23, the question of how much capital banks should hold will probably be subject to wrangling in parliament and the proposals may still be amended or held up. (Editing by David Holmes)