UPDATE 1-Global watchdog welcomes reform proposals for Swiss banking

(Adds details, background)

ZURICH, April 11 (Reuters) - Swiss proposals to better regulate its banking system and make it safer were welcomed by the Financial Stability Board on Thursday, which said changes were particularly important in view of the size of the enlarged lender UBS.

"We welcome the Swiss government's steps to further strengthen their Too Big to Fail framework in light of last year's turmoil," said FSB Secretary General John Schindler.

"Several of the proposals echo recommendations of our recent peer review, and if adopted would make the framework stronger," he added.

UBS and three other systemically relevant banks face tougher capital requirements, the Swiss government said on Wednesday, in an effort to shield the country from a repeat of the collapse of Credit Suisse.

The FSB, a grouping of central bankers, treasury officials and regulators from the Group of 20 top global economies, has

previously

called on Bern to strengthen banking controls, highlighting the dangers a UBS failure would bring to Switzerland.

The watchdog said it wanted to see added resources, tools and early intervention powers for financial market regulator FINMA, and measures to reinforce liquidity support for banks.

"This is particularly important following the merger that created a globally systemically important bank that will be the world's largest as a percentage of home jurisdiction GDP," said Schindler.

The enlarged UBS now has a balance sheet of around $1.7 trillion, twice the size of the entire Swiss economy, and could cause massive damage if it failed.

Separately

, the Swiss National Bank responded to the government's proposals to better supervise UBS and its peers.

"The SNB takes note of the TBTF report and welcomes the regular review of TBTF regulation," the central bank said in relation to the Swiss government's review of Too Big to Fail (TBTF) rules for the financial sector. (Reporting by John Revill)