Credit Suisse must “significantly” boost capital this year to brace itself for a possible worsening of the eurozone debt crisis, the Swiss central bank has warned.

The Swiss National Bank singled out Credit Suisse in its annual financial stability report as a bank that needs to “significantly expand its loss-absorbing capital during the current year.” Credit Suisse’s main rival, UBS, should just continue with its efforts to strengthen its capital, the central bank said.

“Even though the SNB expects a gradual improvement of the situation over the next 12 months, the risk of a rapid and marked deterioration in conditions for the Swiss banking sector remains high,” the SNB said.

“At the end of March 2012, risk-weighted capital ratios calculated using loss-absorbing capital and risk-weighted assets under the new regulations, i.e. Basel III and Swiss ‘too big to fail’ regulations, came to about 5.9 per cent for Credit Suisse and 7.5 per cent for UBS. Relative to the net balance sheet total, however, loss-absorbing capital only amounted to around 1.7 per cent at Credit Suisse and 2.7 per cent at UBS. This capital would, for example, be insufficient to absorb losses such as those experienced by UBS in the recent crisis (over 3 per cent of the net balance sheet total),” the bank said.

“Despite progress achieved, the big banks’ loss-absorbing capital is still below the level needed to ensure sufficient resilience given the high risks in the environment. The big banks’ importance for the Swiss economy and for financial stability requires that they further strengthen their resilience. The SNB therefore recommends that UBS continue with this process – including, in particular, a policy of dividend restraint – and that Credit Suisse significantly expand its loss-absorbing capital during the current year,” it said.

Shares in Credit Suisse fell by 10 per cent in trading yesterday. Société Générale recently moved to a “sell” recommendation on the firm’s stock, having previously had a “hold” position.

Family Wealth Report contacted Credit Suisse about the SNB comments but the firm had not responded at the time of going to press.

Analysts at Mediobanca said a capital-raising move by Credit Suisse appeared highly probable. "An equity issue appears imminent given the lack of obvious business disposal candidates.  In June 2009, when the SNB Stability Report suggested UBS needed additional capital, UBS completed a SFr3.8 billion of equity issue within a week." The bank also retained its "underperform" rating on UBS's shares.

Among other comments, the SNB said: “Even though the SNB currently expects global economic and financial conditions to improve, the risk of a rapid and marked deterioration remains high in the next 12 months.”