By Ariane Luthi

BERN (Reuters) - Switzerland's second-largest party in parliament on Monday presented a set of proposals to tighten regulation of UBS, including that the bank significantly ramp up the capital it holds.

The 49-page action plan by the Social Democrats (SP) argues UBS should hold $40 billion more capital, working from the basis that it had $78 billion in CET1 capital at the end of 2023.

Although the plan has little chance of meeting parliamentary approval, it adds to pressure from the left for tougher rules on Switzerland's last remaining systemically important global bank.

The SP argues that far-reaching measures are necessary to better protect Switzerland from the next banking crisis after the 2023 collapse of Credit Suisse, which UBS then acquired.

UBS, which has pushed back against higher capital demands, did not immediately reply to a request for comment.

The plan also foresees UBS paying for a state guarantee and creating an internal structure that separates business units more clearly from each other.

Other proposed measures include the establishment of an earnings pool at the Swiss National Bank, in which dividends and bonus payments above a certain threshold would be retained for several years and tapped in the event of a crisis.

The paper hinted that the plan will struggle to pass, stating: "If the banking lobby and the majority of parliament are not prepared to make such an arrangement, it must be admitted that UBS's risk for Switzerland is too great."

"In that case UBS would have to be broken up into smaller units, unless UBS relocates its headquarters on its own initiative," it added.

(Reporting by Ariane Luthi; Additional reporting by Oliver Hirt; Editing by Dave Graham)