* Says unlikely UBS will leave Switzerland
* Switzerland pushing ahead with stricter banking regulation
* UBS has warned rules could force bank to move units abroad
ZURICH, May 1 Swiss finance minister Eveline Widmer-Schlumpf does not think UBS UBSN.VX will leave the country if tough bank rules are adopted as Switzerland will still offer the bank better conditions than any other country.
The Swiss government is pushing ahead with plans to make both UBS and Credit Suisse CSGN.VX reach tough new capital standards, saying the benefits to the economy outweigh the costs to the banks. [ID:nLDE73K06O]
UBS Chief Executive Oswald Gruebel has said the stiff Swiss standards could force UBS to move units abroad, but Widmer-Schlumpf has already noted the bank is benefiting from advantages such as low taxes plus political stability in Switzerland.
"I assume that UBS will not migrate from Switzerland. Even with the regulation of the big banks, which we are planning, Switzerland still offers companies like UBS overall far better conditions than any other country," Widmer-Schlumpf was quoted as saying in an interview with Switzerland's SonntagsZeitung.
The Swiss government has proposed both big banks will need an equity Tier 1 capital ratio of at least 10 percent of assets, more than the 7 percent minimum set under the Basel III global standards which begin to take effect in 2013. [ID:nLDE73D1EK]
Both UBS and the powerful right-wing Swiss People's Party (SVP) have said the plan risks making UBS and Credit Suisse less competitive, raising questions about whether the rules might still be watered down during the legislative process.
But Widmer-Schlumpf said the government, the State Secretariat for Economic Affairs, FINMA regulator and the central bank had looked at the consequences of the plans and concluded that the improved stability would lead to more money coming into Switzerland in the mid- to long-term.
Widmer-Schlumpf also said Switzerland had to take a tougher line on banking regulation than other countries as UBS and, to a lesser extent, Credit Suisse were so big that any failure would pose a much greater risk to its taxpayers.
Britain, where the size of its banking system is similarly out of scale with the total economy, is also considering more stringent capital standards than Basel III. [ID:nLDE7371AX]
Widmer-Schlumpf said in the interview she saw no reason for the Swiss rules to be watered down.
"If you only look at the equity capital requirements in isolation then we are more strict, or rather, more consequent," Widmer-Schlumpf said.
"But if you also look at the mix of measures of other countries, where banks are being split up or lumbered with high taxes, then we have prepared a good, transparent and also liberal solution," she said.
"If UBS of all companies is trying to dampen the mood around the regulation proposals and is accusing us of not clarifying the consequences enough, one must not forget what UBS owes the state," Widmer-Schlumpf said.
The Swiss government offered 6 billion Swiss francs to UBS in October 2008 to prevent the bank collapsing under more than $50 billion of writedowns on toxic U.S. assets.
Switzerland later also had to agree to a taxation deal with the United States to end a damaging lawsuit against UBS, in which it gave details of UBS clients to the U.S. government, lifting the veil on the country's cherished tradition of banking secrecy. (Reporting by Katie Reid; Editing by Greg Mahlich)