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UBS chief warns of effects of regulation-paper

* UBS head Gruebel says banks would need more capital-paper

* Says suggested reforms to hamper growth, mean job losses

* Says Q2 bank business likely weaker

ZURICH, June 18 (Reuters) - UBSUBS.NUBSN.VX may have to double its own capital if Swiss regulators put in place the reforms currently under discussion to prevent banks from becoming 'too big to fail', UBS chief Oswald Gruebel said.

The reforms could require the big banks to restructure operations so that foreign entities would have their own capital and would not be reliant on the Swiss parent, Gruebel told the Swiss daily Tagesanzeiger in an interview published on Friday.

“In this case we’d need about twice as much own capital as today,” the Tagesanzeiger quoted Gruebel as saying.

When asked whether that meant UBS and rival Credit Suisse CSGN.VX would need a total of about 100 billion Swiss francs in additional capital, Gruebel said: "In this case, that's about correct."

Switzerland has been leading the global push to tighten banking regulation after UBS made record losses during the credit crisis and had to be bailed out by the government.

A government commission has made further proposals, including changes to the banks’ structure to allow a break-up in the case of insolvency and the introduction of progressive capital requirements depending on a bank’s size.

On Thursday, the Swiss National Bank said the banks needed to hold more and better capital to absorb losses to limit the risk of their dragging the economy down in the event of insolvency. [ID:nLDE65F25V]

“We expect regulators would give us about five years to meet the requirements,” Gruebel said, adding that tougher regulations would hamper economic growth considerably, mean lower dividends to shareholders, and could lead to job cuts.

Business in the second quarter would likely suffer from the euro zone debt crisis and negative market sentiment, Gruebel said echoing statements from UBS CFO John Cryan to analysts last week. [ID:nLDE65911O]

“Generally that will lead to a weaker quarter in the financial sector,” he said, adding that the situation of clients withdrawing money had gotten better since the end of last year. (Editing by Jon Loades-Carter)

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