ZURICH Switzerland's Social Democratic Party has drawn up a proposal to shrink UBS assets after its takeover of Credit Suisse, the Aargauer Zeitung newspaper reported.

The combined bank will have a balance sheet of around 1.5 trillion Swiss francs - roughly double the size of the Swiss economy, posing enormous risks to the country especially as it enjoys an implicit state guarantee, party member and lawmaker Samira Marti told the paper.

The left-leaning Social Democratic Party, the second biggest party in the Swiss parliament, will propose an upper limit for the bank's assets, namely that its assets should not exceed half of Switzerland's GDP, which last year stood at 771 billion Swiss francs.

For the new UBS this would mean reducing its assets to a quarter of their current level.

"That would be a drastic reduction, but from the taxpayer's point of view, it's necessary," the paper quoted Marti as saying.

An alternative would be imposing higher capital requirements if the bank's assets rose above 50% of Swiss GDP.

Any part of UBS's balance sheet above that threshold would require an equity ratio of 30% or more, Marti said of her party's proposal. At present the Swiss parliament is discussing an equity requirement of 15%.

The government-orchestrated rescue of Credit Suisse has seen 209 billion francs in state and central bank support deployed, and caused concern in parliament which rejected the package in a symbolic vote.

"The aim is for UBS to become smaller," Marti told the newspaper. "We have to make improvements so that banks are less vulnerable in a crisis."

(Reporting by John Revill; Editing by Edwina Gibbs)