UPDATE 3-Swiss up deposit insurance, set tough capital rules

(Adds more details on new capital rules, quotes)

By Lisa Jucca

BERNE, Nov 5 (Reuters) - The Swiss government said on Wednesday it was raising its bank deposit guarantee to 100,000 Swiss francs ($85,400) from 30,000 francs as part of a package to shore up the country's crucial financial industry.

The government also unveiled details of stricter capital requirements the country's banking regulator is going to impose on UBS (UBSN.VX) and Credit Suisse (CSGN.VX).

Switzerland's two largest banks will have to comply by 2013 to a leverage ratio, a measure of capital against total assets, and to stricter Basel II rules that measure capital against the risk carried by different asset classes.

"The raising of the guarantee will help reinforce client confidence in the banks," Finance Minister Hans-Rudolf Merz told reporters on Wednesday.

"We had to do something short-term, otherwise the system was not going to be credible," he said, adding that a more comprehensive review of the country's bank guarantee system would take place next year.

The increase in the Swiss deposit guarantee comes after the European Union agreed last month to raise the minimum guarantee in the bloc to 50,000 euros ($68,300), with the European Commission proposing a further rise to 100,000 euros by the end of 2009.

The steps are part of measures aimed at bolstering the financial sector which accounts for nearly 15 percent of Swiss output and come after a state bailout of UBS last month that allowed it to unload $60 billion of toxic assets.

The government is lifting the total amount it is ready to guarantee to protect investors to 6 billion francs from 4 billion. The measures will come into force as soon as necessary laws are changed and will be valid until Dec. 31, 2010.

The Swiss government said the level of protection for deposits in Switzerland was now substantially higher than the new EU limit and said banks would be obliged to keep sufficient assets in the country to cover guaranteed deposits, a demand it said most banks already meet or will meet shortly.

"Clients can therefore be sure that their preferred deposits are secure in every bank in Switzerland," the finance ministry said in a statement.

The ministry said it also plans to allow more generous immediate payments of guaranteed deposits at any bank that gets into difficulties. The sum allowed will be considerably more than the current 5,000 franc limit, but no figure was given.

BONUS LIMITS?

The EBK banking regulator is also working on new minimum remuneration standards for the whole financial industry after an public outcry over bankers' bonuses during the financial crisis.