By Andrew Morse
ZURICH--Switzerland's central bank said Thursday the country's
big banks had made "significant progress" improving their capital
positions over the past year, but urged the lenders to continue
shoring up their leverage ratios.
In its annual stability report, the Swiss National Bank said the
country's big banks, including UBS AG and Credit Suisse Group AG,
should continue improving their capital positions, in particular
their leverage ratios. A leverage ratio is a key measure of
stability that broadly reflects the amount of capital a bank has on
hand relative to its loans and investments.
"The SNB welcomes the significant progress made by the big banks
in improving their capital situation," the Zurich-based central
bank said. Still, the bank "recommends that they continue to
improve their resilience and, in particular, their leverage
ratios."
The comments mark a softening in the Swiss central bank tone
toward the big banks. In the past, the SNB has criticized the
leverage ratios at both UBS and Credit Suisse,
UBS and Credit Suisse have taken steps to boost their respective
leverage ratios and have said they are on track to reach the Swiss
requirement for a ratio of 4% or more by 2019. UBS has reported its
leverage ratio stood at 3.8% as of the end of the first quarter of
this year, while Credit Suisse said its leverage ratio was
3.7%.
The central bank said leverage ratios are becoming more
important because investors focus on the measure during times of
stress. Next year, international rules will require globally active
banks to disclose their leverage ratios, making direct comparisons
possible.
Last month, Credit Suisse suffered a setback to its other
primary measure of stability, its tier 1 capital ratio, following a
$2.8 billion settlement with U.S. authorities for aiding American
tax evasion. The bank said the settlement would have cut its
capital ratio to 9.3% from the previously reported level of
10%.
Credit Suisse said it will shed assets and sell some real estate
to help restore its capital ratio to 10% by the end of this
year.
Still, the SNB said the big banks had made progress on their
tier 1 capital ratios and noted both big banks already comply with
the international requirement of 8.5% that applies beginning
2019.
John Letzing
contributed to this article.
Write to Andrew Morse at andrew.morse@wsj.com