ZURICH, May 13 (Reuters) - UBS CEO Sergio Ermotti said on Monday that criticism that the bank had become too big for Switzerland and that it needed to set aside more capital were misplaced.

Ermotti, who was brought back to UBS last year to lead the process of absorbing Credit Suisse after an emergency rescue, said he agreed with most of the government's recent proposals to make Swiss banking safer but not plans to make UBS hold more capital.

"When you talk about the only areas where we believe it's appropriate not to overshoot is the areas around capital," he told Reuters in an interview in Zurich.

He said that through its acquisition of Credit Suisse, UBS was already having to put aside $20 billion extra in capital.

UBS will reinvest part of $13 billion in planned cost savings on making the bank's processes and businesses stronger following the takeover of Credit Suisse, Ermotti also said.

UBS has seen its shares soar since the takeover, with investors upbeat about the prospects for the combined group given low acquisition costs, a huge increase in assets and its so far relatively smooth integration.

($1 = 0.9268 euros) (Reporting by Elisa Martinuzzi and Noele Illien, Editing by Louise Heavens)