* SNB invests in companies with relatively small market cap
* SNB's stock holdings worth three times more than in 2011
* SNB talking to market participants, authorities over Libor
BERNE, June 20 (Reuters) - The Swiss National Bank has increased its investments in shares of smaller foreign firms as it seeks to put to work billions of dollars and euros it has bought to keep the strong Swiss franc in check.
The SNB held just over 440 billion Swiss francs ($478.57 billion) in foreign currency investments at the end of May, accrued while defending the 1.20 per euro lid on the franc it introduced in September 2011 after the currency was bid to record levels by investors fleeing the euro zone.
At the end of the first quarter, 78 percent of the central bank's foreign exchange reserves was held in government bonds and deposits with other central banks. It increased its stock holdings to 15 percent of its portfolio from 12 percent at the end of 2012.
"We have widened our scope to include shares of companies with relatively small market capitalisation, as well as those in advanced economies not previously considered, with the result that our equity portfolio now covers all advanced economies," SNB board member Fritz Zurbruegg said in a speech in Berne.
Speaking after the SNB said in its quarterly policy announcement it would stick to the franc cap, Zurbruegg said the bank had invested relatively little in these new markets so its currency allocation had hardly changed.
It held 27 percent of its portfolio in dollars and 48 percent in euros at the end of the first quarter.
The bank now holds shares worth 65 billion francs, three times more than it did at the end of 2011, Zurbruegg said.
Zurbruegg also said the bank was in discussions with various authorities over the use of the Libor interbank rate as a benchmark, urging market participants to look at alternative references where necessary.
The SNB is the only major central bank to explicitly target Libor as a policy benchmark. Rate-rigging by international banks has damaged Libor's credibility, however, and has raised questions whether the SNB should change course.
Some 80 percent of banks in Switzerland use Libor as a benchmark for loans, especially mortgages, and it is with them that responsibility for reference interest rates lies, Zurbruegg said.
"They should be aware of this responsibility and become involved, where necessary, in exploring alternative reference interest rates," Zurbruegg said.
"The SNB is playing a supportive role in this regard."
Global regulators are set to provide more clarity by next year on guidelines for financial benchmarks like Libor although they see it as ultimately up to the private sector to decide whether to change the rate-setting system.
$1 = 0.9194 Swiss francs Reporting by Alice Baghdjian; Editing by John Stonestreet