SHARES in Credit Suisse plunged by more than a tenth yesterday after Switzerland’s central bank urged it to cut dividends or issue shares to improve its “below average” capital ratio and protect it from future financial shocks.
The Swiss National Bank singled out Credit Suisse for its risk-weighted capital ratio of 5.9 per cent – an acceptable level under the Basel II rules but below the global average.
It also called on rival bank UBS to hike its risk-weighted capital ratio above its current 7.5 per cent.
And the SNB said these figures fall to 1.7 and 2.7 per cent respectively for loss-absorbing capital.
Both firms have “very high” leverage, the SNB said in its annual stability report, despite cutbacks on risky assets at both banks. UBS and Credit Suisse should trim their balance sheets, and not merely slash risk-weighted assets, it added.
While it does not forecast large losses or writedowns for the country’s banks this year, the SNB is worried that if the rest of Europe spirals, the banks face substantial losses through exposure to mortgages, corporate loans and equities.
“Early signs of a possible recovery in the euro area, which had emerged at the beginning of 2012, have vanished again,” the bank warned.
Credit Suisse, which has paid dividends throughout the crisis, gave SwF0.75 per share to investors in 2011.