CS Credit Suisse Group

ZURICH—Switzerland's central bank said on Thursday that the country's two biggest lenders, UBS Group AG and Credit Suisse Group AG, need to bolster their respective layers of protective capital.

The Swiss National Bank said in its annual Financial Stability Report that while both big banks have met current "too big to fail" requirements designed to protect the Swiss economy in the case of a large bank failure, UBS and Credit Suisse have work to do to meet recently revised rules that go into effect in 2020.

To meet requirements for leverage ratios, or capital held relative to assets and investments, UBS and Credit Suisse each need additional going-concern capital—which can absorb losses under normal operating conditions—of roughly 10 billion Swiss francs ($10.4 billion), the SNB said. It added that the banks could cover "the bulk" of this requirement by issuing so-called contingent convertible debt, designed to turn into equity if a bank's capital levels fall beneath a designated level.

To meet so-called gone-concern requirements, or rules for being able to recapitalize in case of insolvency, UBS and Credit Suisse each must issue loss-absorbing instruments worth between 20 billion and 25 billion francs, the SNB said.

Both banks "need to take action," the SNB said.

A UBS spokesman said in a statement that while bank disagrees "with a number of depictions" in the report, it "does not point out anything materially new." UBS laid out its plans to meet revised stability rules during its last quarterly results presentation.

A Credit Suisse spokeswoman didn't immediately respond to a request for comment.

Write to John Letzing at john.letzing@wsj.com

(END) Dow Jones Newswires

June 16, 2016 10:45 ET (14:45 GMT)

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