Reorganising the investment bank at UBS will take two to three years to complete, its chairman said on Sunday, a day after Chief Executive Oswald Gruebel quit over the $2.3 billion rogue trading scandal.

The UBS board on Saturday accepted the resignation of its 67-year-old German-born chief executive and appointed as his interim replacement Sergio Ermotti, 51, who hails from Switzerland's Italian-speaking region of Ticino.

The board is looking at both internal and external candidates to fill the post permanently and Chairman Kaspar Villiger has said ex-Bundesbank head Axel Weber has already been involved in the CEO selection process as an independent advisor.

But Weber is still not due to take over as UBS's chairman until 2013, Villiger said.

Switzerland's biggest bank has asked the dapper, multi-lingual Ermotti, who was passed over for the CEO job at Italy's UniCredit, to speed up a scaling back of the investment bank.

Revamping the bank will probably take the next two or three years until it's all completed, Villiger told the NZZ am Sonntag.

He also said that Ermotti, who joined UBS in April as head of Europe, Middle East and Africa, and has worked in London and New York, is a strong candidate to remain as CEO.

He has lots of experience and brings a lot of what's needed to run the bank. I also think it's good that he's Swiss, Villiger said.

With the Swiss public losing its patience with UBS after a series of crippling crises, Ermotti's nationality may give him an edge over competitors and help him deal with politicians and regulators.

He's a professional, open to the bureaucrats and Swiss concerns, but beyond any patronage, Der Sonntag quoted the Swiss financier Tito Tettamanti as saying.

Meanwhile Villiger, a former Swiss finance minister who also faced calls to resign over the scandal, said in a conference call with reporters on Saturday that the bank was sticking to plans for Weber to join the board next year and take over as chairman in 2013.

He reiterated that point on Sunday.

It's not optimal for the president and the chief executive to step down at the same time. This way Axel Weber has the chance to get up to speed, Villiger told the NZZ.

He'll also live in Switzerland and get to know the Helvetic characteristics. We see no reason to change this plan.

EARLY EXIT?

Gruebel, a banking industry veteran who helped turn around UBS's rival Credit Suisse, was brought out of retirement to revamp UBS after it almost collapsed in 2008 under the weight of more than $50 billion lost on toxic assets.

In a memo to staff Gruebel said the trading loss had shocked him deeply and that it was in the bank's interest to move ahead with someone new at the helm. Villiger said he had asked Gruebel to stay.

Gruebel initially wanted to stay on and decided to make his exit only in the course of board meetings in Singapore, when he realized some board members no longer backed him, the German-language SonntagsZeitung said, citing UBS insiders.

Opposition to Gruebel's strategy of a banking group focusing both on wealth management and investment banking had been rising in recent months, the newspaper said.

The Swiss parliament also looks set to enact new capital adequacy standards for big banks that go beyond the Basel III rules, and Gruebel made sharp criticisms of the plan earlier this year. UBS has said it will not pay a dividend as it seeks to shore up capital to comply with the new rules

Ermotti said on Saturday UBS will use its investment bank to service its private banking clients, scaling back but not exiting the fixed income business.

Without restructuring, over half of UBS's capital base will be tied up in fixed income when investors want to buy a fabulous Swiss asset and wealth manager with a profitable but materially smaller brokerage operation, said Morgan Stanley analyst Huw van Steenis, adding UBS should refocus on areas such as equities and M&A.

Gruebel's decision to step down following the $2.3 billion loss was also welcomed by several Swiss politicians on Sunday and the center-left Social Democrats (SP) last week pushed for a ban on risky investment banking during a parliamentary session debating the 'Too Big To Fail' higher bank capital requirements.

The trading scandal showed risk controls were inadequate, and Gruebel's stepping down was a first step forward, prominent SP-member Susanne Leutenegger Oberholzer told local agency AWP.

For Pirmin Bischof of the center-right Christian Democrats, Gruebel's resignation and Ermotti's promotion meant UBS was keen to steer a new course.

Gruebel couldn't identify with the 'Too Big To Fail' package, AWP quoted Bischof as saying, adding that Gruebel could sense the times were changing. And for this new epoch he wasn't the right figure head.

(Additional reporting by Steve Slater and Philipp Halstrick; Editing by Greg Mahlich)