ZURICH, April 22 — The Swiss central bank said today that it would raise the amount of funds that domestic lenders must store in its vaults, a move that weighed on UBS shares.

The Swiss National Bank (SNB) said the minimum reserve requirement will increase from 2.5 per cent to four per cent from July 1.

"Since sight deposits which are held by banks to meet minimum reserve requirements are not remunerated, the interest costs for the SNB will be reduced,” it added in a statement.

Around 1130 GMT, UBS shares were down around 10.4 per cent following the announcement.

The move follows government plans unveiled earlier this month that would tighten rules for banks deemed too big to fail.

UBS, Switzerland’s biggest bank, acquired struggling rival Credit Suisse last year in a government-engineered deal aimed at preventing a financial crisis.

The acquisition created a banking behemoth with a balance sheet twice the size of Switzerland’s annual economic output, causing significant jitters.

The government’s proposed changes could force UBS to set aside an additional 15 to 25 billion Swiss francs (US$16.4 billion to US$27.4 billion), according to sector experts quoted in media reports. — AFP