* UBS set total capital ratio target of 19.2 pct by 2019
* CS total capital requirement set at 16.7 pc
* Both figures assume balance sheets stay at 2012 level
* Actual requirements likely to be lower
* International rules require total ratio of 8 percent
(Recasts lead, adds detail, analyst comments)
By Joshua Franklin and Laura Noonan
ZURICH/LONDON, May 7 Switzerland's financial
regulator has laid out rules that could force the country's two
biggest banks to hold more than double the total capital
required by international standards, in its latest effort to
ensure the two are protected from future financial shocks.
Regulator Finma published provisional rules on Wednesday
that would require UBS to hold total capital worth
19.2 percent of its risk-weighted assets by 2019, while Credit
Suisse would have to meet a 16.7 percent ratio.
By comparison only 8 percent is required under the global
Basel III accord.
The requirements are designed to insulate Swiss banks from a
repeat of the five-year-old financial crisis that triggered
massive losses and focused the attention of the world's
policy-makers on making sure banks were no longer "too big to
But the eye-watering levels are not likely to ever become
real requirements, because Swiss banks are shrinking so quickly
by scaling back or exiting some business areas, reducing the
need for bigger capital buffers.
The Swiss banks must only meet Finma's capital levels if
their balance sheets remain at the size they were in 2012 and
the regulator said it was "not unreasonable" to assume the
ultimate requirements would drop as the banks continue to pare
back their operations.
Some analysts noted the new stipulations had been expected.
"This legislation has been well-flagged," said Matt Spick, a
London-based analyst with Deutsche Bank. "The banks are allowed
to include balance sheet reductions as reducing their
Kian Abouhossein, head of European banks research at JP
Morgan, agreed. "We don't think this changes anything," he said,
adding that Swiss capital levels will be the "toughest in the
UBS's total assets fell 22 percent from end-2012 to March
2014. Credit Suisse's fell by about 5 percent.
On Tuesday, UBS told investors it expected its ultimate
requirement to be 17.5 percent.
UBS and CS declined comment on Finma's statement on
Spick noted there were tougher targets in some respects in
some parts of the world, such as Sweden, and added that the most
pressing part of the capital requirements was for the "common
equity Tier 1" component, the purest kind of capital, where the
Swiss requirements are in line with international norms.
A second capital requirement from the Swiss regulator says
UBS should confine its total balance sheet to less than 22 times
capital, while Credit Suisse has to keep its to 25 times. The
so-called leverage ratio has not yet been set internationally
but is likely to be at least 33 times.
UBS has a higher capital requirement because of its higher
market share in Switzerland, Finma said.
(Editing by David Holmes)