ZURICH, April 22 (Reuters) - The Swiss National Bank

(SNB) is raising the minimum reserve requirement for domestic

banks, it said on Monday, potentially saving it hundreds of

millions of Swiss francs in interest payments each year.

The SNB said in a statement that it is also raising the

minimum reserve ratio from 2.5% to 4% and that because deposits

held by banks to meet minimum reserve requirements are not

remunerated, interest costs for the SNB would be lowered.

The SNB would save about 600 million Swiss francs ($659.05

million) a year as a result of the adjustments, a person

familiar with the matter said.

Shares in Switzerland's biggest bank UBS fell more

than 1.5% in morning trade, underperforming European peers.

Zuercher Kantonalbank analyst Ausano Cajrati Crivelli said

the change was significant and would be felt.

"Because banks will have higher minimum reserves on which

interest is not earned," he said, adding that the change would

need further analysis to assess the exact impact on lenders'

profitability, he added.

The Swiss government this month set out proposals aimed at

making the banking sector more robust and in particular to

prevent UBS from suffering the kind of collapse that hit its

long-term rival Credit Suisse.

UBS bought Credit Suisse after its implosion, stirring fears

that the enlarged bank had the potential to upend the economy.

In a statement, the central bank said it would amend the

National Bank Ordinance as of July 1 to raise the minimum

reserve requirements, and noted that the changes would not

affect its current monetary policy stance.

Liabilities arising from cancellable customer deposits,

excluding tied pension provision, would in future be fully

included in calculations of the minimum reserve need, it said.

That revokes the previous exception whereby only 20% of such

liabilities counted towards the calculation, the bank added.

($1 = 0.9104 Swiss francs)

(Writing by Miranda Murray

Additional reporting by Noele Illien; Editing by Dave Graham,

Kirsten Donovan)