MILAN, March 13 (Reuters) - It would be "disappointing"

if the strict criteria UniCredit has set for

considering potential acquisitions prevented the Italian bank

from deploying at least part of its ample excess capital in this

way, its chief executive said.

"My view is that at some point you need to build the

business, so M&A at the right price is better (than

distribution)," CEO Andrea Orcel told the Morgan Stanley ( MS )

investor conference in London on Wednesday.

Orcel said that banks' elevated cost of equity prevented

UniCredit from "lowering the bar" on possible acquisitions, even

when assets could be a strategic fit.

Even when an asset is strategic, the market needs to have

full confidence in the cost benefits of any deal and the

risk-adjusted internal rate of return must be at least 15%,

Orcel said.