ZURICH (Reuters) - Weaknesses in the capital regime for the Swiss banking sector still need to be addressed after the 2023 collapse of Credit Suisse, the Swiss National Bank said on Tuesday, backing government efforts to make the industry more robust.

Switzerland has pledged to introduce stricter banking regulations in response to the demise of Credit Suisse, which was subsequently taken over by its old rival UBS.

At the centre of proposals set out by the government last year is that UBS should hold more capital to make it more robust and prevent a repeat of the Credit Suisse meltdown.

How much UBS should hold is hotly debated and focuses on the degree to which it should capitalise its foreign subsidiaries.

In its annual report, the Swiss central bank noted that it had in an assessment last June highlighted weaknesses in UBS's capital backing for its subsidiaries.

"The SNB emphasised that the current capital position of the UBS parent bank is stronger than that of Credit Suisse before the crisis," it said. "Nevertheless, weaknesses in the current capital regime need to be addressed."

UBS argues that it is already well capitalized in comparison to global rivals and that making it hold billions of additional dollars risks putting it at a disadvantage and threatens the competitiveness of Switzerland as a global financial centre.

The SNB struck a positive note on the integration of Credit Suisse by UBS, which the latter says has been progressing well.

"The development of market indicators, such as credit default swap (CDS) premia and the share price, indicates that the market is taking a positive view of the prospects for the combined bank," the SNB said.

The Swiss central bank also noted that the mortgage and real estate markets continue to pose significant risks.