European bank shares fall after Trump's tariff plans, UBS down 4% on downgrade

LONDON, March 27 (Reuters) - European banking shares fell on Thursday after U.S. President Donald Trump announced plans to slap 25% import tariffs on all vehicles and foreign-made auto parts from next week.

Banking shares, which are sensitive to the overall economic outlook in the region, fell 1.3% .SX7P by 0842 GMT, against a 0.73% drop in the wider European market .STOXX.

Among the biggest fallers was Switzerland's UBS UBSG.S, which tumbled 5% before regaining some ground to last trade down 3.8%.

BofA downgraded UBS shares to "underperform", citing uncertainty over the Swiss regulatory framework beyond May and their expectation that the government will impose additional capital requirements totaling $20-$25 billion.

Germany's Deutsche Bank DBKGn.DE slid 2.3% in early Thursday trading and Commerzbank CBKG.DE by a similar amount. French lender Societe Generale SOGN.PA dropped nearly 2%.

Swedish bank Handelsbanken SHBa.ST tumbled 11.7%, the worst performer among lenders, but it was trading ex-dividend. Swedbank SWEDa.ST, also ex-dividend, fell 8.5%.

Reuters reported on Wednesday that UBS had floated the idea of capping the future size of its investment bank as a concession to head off tougher capital requirements.

One of Switzerland's main political parties later said it could soon propose such a cap for the bank.

Banks are one of the best performing European sectors this year however. They are up 27% year to date.