ABU DHABI, March 1 (Reuters) - Former European central banker and chairman-designate of Swiss bank UBS Axel Weber said that he saw the problems facing European banks as the toughest unresolved part of the euro zone debt crisis, with much-needed capital hard to come by.
"Countries are turning the corner and becoming fiscally more prudent. Sovereign debt issues are about to be solved...there will be many hiccups in the process, but it will happen," Weber, a former governing council member of the European Central Bank, told a financial markets forum on Thursday.
"The difficult part that is still in front of us is healing the problems of European banks, and these problems are much more pronounced," he said, underlining the need for "more decisive action" by policymakers.
Weber, due to become chairman of UBS at the shareholder meeting in May, said that he had felt after the last financial crisis that banks needed to improve capital buffers to survive without taxpayer money, and that this was still the case.
But funding would be difficult to raise, he added.
"Issuing capital in the market will be a challenge for many European banks because there is a question of how this crisis will play out," he said.
He predicted that big banks would retrench to home markets, but that this would exclude a retreat from the Gulf.
"Large global banks will focus more of their business activity on their home countries and adjacent regions like for example the Gulf region here," he said.
"You will see European banks become much stronger in this region because it is closer to their prime markets where they operate and they will probably retreat from markets that are further out," he said.
Weber declined to comment on the policies of his former colleagues at the ECB.
"You will not hear anything negative about my former colleagues at the ECB, they manage the bank at a very difficult time. If I say something critical, I would do this in private, and only my wife would hear it." (Editing by Sitaraman Shankar)