UBS chairman Kaspar Villiger should stand down at the bank's next annual general meeting in May and hand over then to designated successor Axel Weber, UBS Honorary Chairman Nikolaus Senn was quoted as saying in an interview on Sunday.

UBS, which has been hit by a $2.3 billion loss caused by unauthorized trading, named former Bundesbank chief Weber as its next chairman earlier this year. Weber is scheduled to take over from Villiger in 2013.

Central bank rules impose a 'cooling off period' on former officials when they switch jobs but financial sources with direct knowledge of the matter told Reuters in September that Weber had asked the German central bank if he can join UBS earlier than planned.

It would be good if he (Villiger) would give designated successor Axel Weber the chairmanship at the next annual meeting in May, Senn said in an interview with Swiss newspaper SonntagsZeitung.

UBS is also currently hunting for a new chief executive after Oswald Gruebel stepped down. Villiger has said he intends to stay on as chairman until 2013 as it would not be good for continuity for the chairman and CEO to leave together.

Sergio Ermotti, who joined UBS in April as head of Europe, Middle East and Africa, is currently acting as a stand-in leader until a permanent CEO can be found. Senn said Ermotti had good chances of clinching the top job.

He still has to prove himself, but he is a good man. People know him and he knows the bank. Ermotti has also worked abroad. I could imagine that he would be a good boss. He is someone who likes to get things done, an energetic guy. I give him good chances, Senn said, adding it would be an advantage to have someone Swiss at the helm.

The 51-year-old Ermotti comes from Switzerland's Italian-speaking region of Ticino and has been regarded as a likely candidate for further promotion since he joined UBS.

Senn, who had said he did not think Gruebel could withstand pressure to step down, also said in the interview talk of selling UBS' Investment Bank was nonsense.

The people who say that don't know what an investment bank is, Senn said.

In a separate interview, Ermotti said he too valued investment banking as a part of UBS.

He told Swiss newspaper SonntagsBlick that UBS would need another 2 to 4 years to turn itself around.

But UBS has what it takes to make it back to the top, Ermotti said.

(Reporting by Katie Reid; Editing by Sophie Walker)