* FINMA says UBS, CS can weather severe global recession
* FINMA says both banks need to do more on capital, leverage
(Adds details, comment, background)
By Sven Egenter
ZURICH, Oct 2 (Reuters) - Switzerland's two large banks, UBS and Credit Suisse, could weather a severe deterioration of the economy, Swiss banking regulator FINMA said on Friday, publishing its conclusion from a stress test for the banks.
However, both banks had to continue efforts to improve their capital base and cut debt, FINMA said.
"Both large banks currently meet FINMA's requirements, which are rigorous by international standards," it said.
The European Union unveiled the results of a stress test for the region's most important banks on Thursday, which showed that European banks would be able to withstand a harsh recession in spite of further heavy losses. [ID:nL150246]
FINMA said the Swiss test, which was based on the situation at the end of July, was similarly strict to the EU one.
The test assumed a deep, worldwide recession, accompanied by a significant deterioration in the finance and property markets, and the banks had to maintain a Tier 1 ratio of above 8 percent when the scenario was applied, FINMA said.
UBS
Credit Suisse said in a statement it was extremely well capitalised with a very clean balance sheet: "Even under extreme stress scenarios we would have a strong tier 1 capital ratio".
A UBS spokeswoman would only say the bank had taken note of the test with satisfaction.
The Swiss government had to bail out UBS last year, after the bank ran up more than $50 billion in writedowns in the course of the financial crisis and posted the largest loss in Swiss corporate history. [ID:nLB437728]
The Swiss National Bank has been leading a push for tighter bank regulation, which would require the two big banks to improve capital and liquidity buffers. [ID:nLP510467]
FINMA earlier this week emphasised that the two big banks, which are considered too-big-to-fail for the Swiss economy, may face tighter regulation than smaller domestic players and also than international competitors. [ID:nLU218881]
"Despite the positive nature of this result, FINMA still expects the large banks to continue in their efforts to both improve their capital base as well as the reduction of their leverage," FINMA said.
UBS and Credit Suisse officials have warned that tight Swiss regulation may put them at a competitive disadvantage and have urged FINMA to coordinate new rules with other international regulators.[ID:nLU62820]
For the full statement click: www.finma.ch/e/aktuell/pages/mm-stresstests-20091002.aspx
(Reporting by Sven Egenter; Editing by Ron Askew and Toby Chopra)