March 20 (Reuters) - Banking stocks and bonds fell sharply on Monday as the hit to investors from UBS Group's state-backed takeover of Credit Suisse fanned concerns about the health of the global banking sector.

UBS Group AG (UBSG.S) shares sank by 7% amid concerns among investors about the long-term benefits of the deal and the outlook for banks in Switzerland, a country once seen a paragon of sound banking.

In a package engineered by Swiss regulators on Sunday, UBS will pay 3 billion Swiss francs ($3.23 billion) for 167-year-old Credit Suisse Group AG (CSGN.S) and assume up to $5.4 billion in losses.