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Credit Suisse needs 'dividend restraint'

June 14, 2012: 11:21 AM ET

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Credit Suisse and UBS need to raise additional capital and should cut back on their dividend payments to investors, the Swiss National Bank said Thursday.

The two largest Swiss banks need to raise more capital and show "dividend restraint," said the SNB in its latest financial stability report, which noted that the banks have made progress toward meeting international capital requirements, but both need additional buffers to ensure resilience "given the high risks in the environment."

The report shook investors' confidence in both banks. Shares of Credit Suisse (CS) sank 9% and UBS (UBS) eased 0.5%.

Related: Euro crisis: It's still not over

While the banks have "moderate" exposure to troubled euro area nations, both have capital levels below the international average. "This is particularly true for Credit Suisse," which should "significantly expand its loss absorbing capital," said SNB.

"In the event of a renewed escalation of the euro area crisis, although losses on direct exposures to the peripheral countries would be relatively small, the accompanying general deterioration in economic conditions would bring with it substantial losses compared to the banks' loss absorbing capital," the central bank said in its report.

Credit Suisse responded that its total capital ratio is 20%, saying in a statement that it is "one of the best capitalized and funded global banks."

"Credit Suisse has been at the forefront in adapting to regulatory change and it today is well in excess of the very high capital requirements of the Swiss regulator," the statement said.

UBS issued a statement saying the SNB report "positively highlights" the bank's moderate eurozone exposure, reduction of risky assets and increased capital base. But the bank took issue with the SNB's assessment of its capital needs.

"While we are respectful of the SNB's views, we do not believe a number of these criticisms can be justified," the statement said. For example, UBS said it has the highest capital ratio in its peer group, at 18.7%

"Comparisons of our numbers to figures reported by our peers may lead to inaccurate conclusions due to the many qualitative differences in the disclosed numbers," the UBS statement said.

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