Swiss central bank says UBS, Credit Suisse debt still too high

Thu Jun 20, 2013 8:17am EDT
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By Katharina Bart

ZURICH (Reuters) - Credit Suisse CSGN.VX and UBS UBSN.VX must cut debt levels that still top international rivals, the Swiss National Bank (SNB) said on Thursday, stopping short of making any recommendation on their shareholder payout policy.

Swiss banks have pruned assets, raised capital and cut their investment banking arms to meet stricter rules spawned by the global financial crisis, and Swiss authorities added extra regulations after the Swiss state had to bail out UBS in 2008.

They also face fines following scandals including rigging benchmark interest rates and helping rich Americans avoid tax.

The central bank urged Credit Suisse and UBS - major contributors to Swiss GDP - to stay on course with planned measures that it said are likely to lead to a "substantial" improvement in leverage, or debt-to-equity ratios by year-end.

"Given the prevailing risks in the environment and the losses incurred in the recent financial market crisis, the SNB still considers current leverage ratios at the Swiss big banks to be low," the SNB said in its yearly stability report.

UBS and Credit Suisse both reported a leverage ratio of 3.8 percent at the end of the first quarter. The Swiss financial market regulator requires 4.3 percent by 2019.

UBS said its leverage ratio stands just short of 2019 requirements. Credit Suisse declined to comment.

Last year's SNB stability report sent shares in Credit Suisse to their lowest since 1992 by suggesting it halt dividends or issue shares to bolster capital. Credit Suisse has since outlined measured to bolster capital by more than 15 billion Swiss francs ($16.31 billion).   Continued...

The logo of Swiss bank Credit Suisse is seen on a building at Paradeplatz square in Zurich, February 13, 2013. REUTERS/Michael Buholzer