ZURICH (Reuters) - Worries mounted in the market that UBS AG (UBSN.VX: Quote, Profile, Research) would unveil more losses this week after the Swiss bank said at the weekend it had begun lowering the value of some structured securities held by clients.

UBS shares were down 2.6 percent at 1107 GMT on Monday on concerns about its $5.9 billion exposure to Auction Rate Securities (ARS), a class of structured investments that has suffered liquidity problems in the global financial crisis.

Analysts at Merrill Lynch say they expect UBS to have to write down up to 5 percent of its exposure to ARS -- or around $295 million. UBS told its clients on Friday that it would mark down the value of their ARS holdings.

"Unknown unknowns from credit markets can still spring negative surprises for the banking sector," Merrill Lynch said.

UBS shareholders are on tenterhooks amid expectations the bank, Europe's hardest hit by the financial crisis, may unveil fresh subprime losses and seek a new capital hike this week, ahead of an annual general meeting on April 23.

Analysts expect UBS to write down between 10 billion Swiss francs ($10.03 billion) and 20 billion Swiss francs in ailing assets this year, in addition to $18 billion in 2007.

Shareholders have already approved 19 billion francs in capital-raising measures.

The bank needs a sound capital base to underpin its wealth management business for rich clients, who have less tolerance to losing money than institutional investors and are easily irked by negative headlines.

ARS writedowns illustrate how even safe assets have suffered from a lack of liquidity since the outset of the financial crisis in August.