August 8, 2015 / 10:36 AM / 4 years ago

Swiss National Bank still ready to intervene -Zurbruegg in paper

* Zurbruegg: franc still “strongly overvalued”

* Sees worst over for Swiss economy after first half

* ‘Too big to fail’ bank risk not completely eliminated

ZURICH, Aug 8 (Reuters) - Switzerland’s central bank is still ready to step into currency markets if needed to rein in the Swiss franc, policymaker Fritz Zurbruegg told a newspaper, calling the franc “strongly overvalued” despite its recent dip.

“We are ready to intervene if it will be necessary from a monetary policy perspective,” Zurbruegg, vice chairman of the Swiss National Bank (SNB), told Finanz und Wirtschaft in an interview published on Saturday.

“We made this clear for example after announcement of the referendum (on potential bailout terms) in Greece as there were increased safe-haven flows of funds into the franc.”

The SNB gave rare confirmation in June that it had intervened to weaken a franc whose strength has hamstrung Switzerland’s export-reliant economy.

The SNB in January abandoned efforts to keep the euro above 1.20 francs, sending the Swiss currency soaring. The euro now trades around 1.0780 francs, its strongest since February but still below the level the SNB once sought to defend.

The paper had posted most of the interview on its website on Friday, citing Zurbruegg as saying the SNB will maintain its negative interest rates despite the franc’s dip.

At its last policy meeting in June, the SNB kept its target range for three-month Libor rates at -1.25 to -0.25 percent and a 0.75 percent charge on some cash deposits.

In the print version of the interview, Zurbruegg said the worst should be over for Swiss economic growth after the first half of the year. “We are counting here on recovering global economic growth that should support demand for Swiss products.”

Zurbruegg laid some responsibility for the franc’s surge on Swiss investors who have sharply scaled back foreign investment. “We thus have to reduce the overall attraction of the franc. That works only if the market rates fall overall,” he said.

Zurbruegg dismissed suggestions that the SNB put a large part of its foreign currency reserves into a special fund, saying managing reserves was a central part of monetary policy.

He also said the risk that major banks like UBS or Credit Suisse were too big to fail had not been completely eliminated, noting crisis plans needed improvement.

“More measures are needed to strengthen the Swiss package, especially in the area of equity,” he said, adding big banks had improved capital ratios when measured by risk-weighted assets but had room to improve when it comes to leverage ratios.

Domestically focused banks were well capitalised but should be very cautious on lending and interest rate risk, he added.

He cited imbalances in the residential property market that made it too early to sound the all-clear on bubble risks. (Reporting by Michael Shields; Editing by Ruth Pitchford)

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