(Corrects mistranslated quotes in paragraph 4 to say "risks that others do not like" and in paragraph 5 to say the property market "has turned")
ZURICH, July 6 Switzerland's property and equity markets are still at risk of instability due to the low interest rate environment, a board member of the Swiss central bank said in a newspaper interview published on Sunday.
Real estate prices, mortgage lending and equities have risen strongly in Switzerland in recent years, a by-product of ultra-low interest rates set by the Swiss National Bank to lower the appeal of the Swiss franc.
The SNB cannot easily raise rates as this would clash with its efforts to cap the franc. Fritz Zurbruegg said the low rates raised risks for Swiss financial stability.
"We always constantly point out the risks that others do not like," Zurbruegg said, when asked in an interview with Switzerland's SonntagsZeitung and Le Matin Dimanche whether there was a risk of a crash in the property and stock markets.
"We are often criticised for being the last to understand that the property market has turned. The fact is that the long sustained period of low interest rates increases the risks to financial stability."
The warning comes just over two weeks after the SNB stuck to its almost three-year old policy of capping the franc at 1.20 per euro and said it stood ready to take further steps if necessary in the wake of the recent easing by the European Central Bank.
The central bank began holding down the safe-haven unit in 2011 after investors fleeing the euro zone crisis bid the currency up to record levels.
Zurbruegg also cautioned that he saw similar patterns in the housing market to those in the 1990s, just before a real estate collapse that dented growth and hurt banks.
"In terms of price trends, we have a similar picture today as we did back then," Zurbruegg is quoted as saying.
Swiss cooperative bank Raiffeisen, cantonal banks such as Zuercher Kantonalbank and Banque Cantonale de Geneve , and other regional lenders provide the bulk of Swiss mortgage lending.
After repeated warnings from the SNB and the International Monetary Fund of a looming housing bubble, Swiss banks said last month they would tighten requirements for mortgage loans.
Zurbruegg said the new measures, along with the country's capital requirements and the SNB's policy tools, would help prepare Switzerland's lenders in the event of a drop in property prices.
The SNB board member also cautioned Switzerland should hold off on implementing new rules on banks until after a review next year of laws on banks regarded as being "too big to fail".
"You cannot constantly move the goalposts," Zurbruegg said. "First the current law must be implemented. In 2015 there is a new evaluation. Then we will see."
Switzerland's finance minister said last year the country's banks should be subject to higher leverage ratio requirements. (Reporting by Joshua Franklin, editing by William Hardy)