ZURICH: The Swiss National Bank on Thursday welcomed the "significant progress" made by UBS and Credit Suisse at improving their capital, but urged Switzerland's two largest banks to improve their leverage ratios.
"The SNB recommends that they continue to improve their resilience and, in particular, their leverage ratios," the central bank wrote in its annual financial stability report published on Thursday.
The two have made significant changes in recent years to comply with the Swiss interpretation of tougher international rules set to take effect in 2019.
Zurich-based UBS, which on Thursday said it had taken note of the SNB's recommendations, has withdrawn from large parts of riskier debt-trading activities in favour of focusing on its flagship private bank.
In May, UBS said it will revamp its corporate structure to ensure it can be broken up more easily in a crisis, cutting the amount of money it must set aside for potential losses and allowing it to pay shareholders a special dividend.
Meanwhile, Credit Suisse said last month it will begin paying out roughly half its profits to shareholders once it hits a key capital ratio.
It will also reduce assets, sell real estate and take other actions to help meet the 10 percent capital ratio, which it expects to achieve by year-end.
Credit Suisse last month became the largest bank in decades to plead guilty to a US criminal charge and will pay more than $2.5 billion in penalties for helping wealthy Americans evade taxes.
The SNB also said imbalances in the Swiss housing and mortgage markets persisted but had eased recently.
Last week, a Swiss official said the government was weighing new measures to cool demand in the housing market out of fear that Switzerland's high levels of household debt could provoke a real estate crash if the economy went into recession.
The SNB's "baseline" view is that Switzerland's economy continues to grow, making conditions favourable for the banking sector. The financial stability report comes alongside the central bank's June monetary policy assessment.
The SNB's rate decision is expected at 0730 GMT.
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