ZURICH, Sept 10 (Reuters) - UBS AG Chairman Kaspar Villiger warned against overreacting to the financial crisis with too much regulation, saying that while banks made mistakes, politicians should take most of the blame.
Villiger, a former Swiss finance minister brought in as UBS chairman earlier this year after the government bailed out the bank, was speaking at a conference on restoring trust in financial markets.
"Many banks have made inexcusable mistakes, however these mistakes are not the cause of the crisis. The markets have not failed, they have reacted logically to the misguided incentives set by politicians, in particular (in) the U.S.," he said.
Villiger said factors that drove the crisis included low U.S. interest rates, U.S. political pressure to promote mortgages to low earners and pro-cyclical accounting rules.
He said there was now a tendency to over-regulate financial markets, but added he was not against new Swiss rules to demand stronger capital levels or control bonuses, as long as they did not put Swiss banks at an international disadvantage.
"The financial markets do not need more regulation, they need better regulation," he said. "Now there is the danger that one regulates too much."
UBS said last year it was axing bonuses for top executives and linking future payouts to the bank's results but it has faced criticism for recent big hikes in pay for investment bankers to retain key staff after the bonus cut.
Swiss financial regulator FINMA is demanding banks link staff bonus plans to long-term performance and is requiring UBS and Credit Suisse to shore up their capital base to at least 1.5 times minimum international standards by 2013. (Reporting by Emma Thomasson; Editing by David Holmes)