UPDATE 1-SNB's Jordan says will keep franc cap as long as needed
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ZURICH, Sept 2 (Reuters) - The Swiss National Bank's cap on the franc is still needed as a sudden appreciation of the currency cannot be ruled out in the current environment, the central bank's chairman said on Monday.
"The minimum exchange rate will be kept in place for as long as necessary for monetary policy," Chairman Thomas Jordan said in an interview with the Bieler Tagblatt. "We currently see no reason at all to announce an exit."
The Swiss central bank imposed a 1.20 per euro lid on the safe-haven franc two years ago to ward off deflation and a recession, after investors fleeing the euro zone crisis bid the unit up to record levels.
The currency has weakened beyond the 1.23 mark since then, but is still highly valued, Jordan said. The central bank's next policy meeting will be held on Sept. 19.
The SNB's efforts to restrain the value of the Swiss franc has meant it cannot easily resort to an interest rate hike to rein in lending into Switzerland's booming housing market, making the spectre of a real estate bubble bursting a prominent worry for the SNB.
Jordan said the Swiss real estate market had shown some signs of cooling in recent weeks, but warned prices were still rising, and banks should be more cautious about lending.
Though Swiss banks have pruned assets, raised capital and cut their investment banking arms to meet stricter rules spawned by the global financial crisis, Jordan also reiterated concerns that current leverage ratios at the country's big banks were low.
"Both big banks still need to improve their leverage ratio," Jordan said. (Reporting by Alice Baghdjian; Editing by Toby Chopra)