13 billion, as opposed to roughly chf 4 billion in 2009. this positive development was driven by ubs, whose situation improved further over the course of last year. in addition, both ubs and credit suisse continued to increase their regulatory capital ratios ( ratio of tier 1 capital to risk - weighted assets ), which were already very high by international standards. moreover, their financial strength ratings also improved. according to rating agency assessments, the big banks ’ intrinsic financial soundness improved significantly last year. however, two aspects should be borne in mind when assessing the big banks ’ situation : first, their exposure to credit and market risk relative to their capital remains considerable. although credit quality abroad has improved slightly, it still remains at historically low levels, particularly in the us and europe. in view of this, lower - than - expected economic growth or a deepening of the debt crisis in europe could potentially lead to a further deterioration in the creditworthiness of individual countries. yet, the big banks ’ exposures to sovereign debt in bis central bankers ’ speeches peripheral euro area countries are only moderate. should the debt problems in the already vulnerable international banking system or in other sovereigns become amplified, however, these banks could face considerable losses. second, the big banks ’ economic capital situation is less comfortable than their very high regulatory capital ratios under basel ii might suggest. a considerable portion of both institutions ’ regulatory capital is made up of capital components that proved to be not fully loss - absorbing during the recent crisis. these include, for instance, deferred tax assets, which are only realised if a bank is profitable, or certain hybrid tier 1 capital instruments, which only become loss - absorbing in the event of bankruptcy. thus, such capital components will no longer be recognised under basel iii and will be phased out by 2019. the transition period granted to banks gives them sufficient time to meet the new requirements. however, in view of the risk exposures and the prevailing uncertainties in the economic environment, it is crucial that the big banks build up a sufficient base of loss - absorbing capital as swiftly as possible during this transition period. after adjusting for the not fully loss - absorbing components, the big banks ’ remaining capital buffers are still thin in light of the aforementioned risks. despite some improvement, leverage for both ubs and credit suisse is still high by international standards. taking only fully loss - absorbing capital into account, the average capital ratio of both big banks amounted to less than 2 % of

thomas j jordan : financial stability report – potential risks and actions introductory remarks by mr thomas j jordan, vice chairman of the governing board of the swiss national bank, at the half - yearly media news conference, berne, 16 june 2011. * * * in my introductory remarks today, i would like to present the most important points from our recently published financial stability report, in which we consider potential risks to financial stability and identify where action may be needed. general economic and financial conditions for the swiss banking sector improved further in 2010. overall, global economic growth was stronger than expected last year, despite the expiry of fiscal stimuli. in switzerland, too, economic development was robust and growth was high in an international comparison. against this background, the profitability and capital situation of both big banks improved further, and remained good for banks with a domestic focus. however, the economic environment remains fragile, and a renewed, sharp deterioration over the next twelve months cannot be ruled out. in the short term, the prevailing uncertainty primarily affects the two big banks, which are still exposed to considerable credit and market risk relative to their loss - absorbing capital. for domestically focused banks, by contrast, the risks are largely of a medium - term nature, and are related to potential adverse developments on the swiss real estate and mortgage markets. in view of these risks, all swiss banks should ensure that they have a broad and high - quality base of loss - absorbing capital. for the big banks, in particular, it is crucial that a sufficient capital base be laid down as soon as possible, so that losses can be fully absorbed. the snb welcomes the fact that, in 2010, both big banks already took important first steps in this regard, and we would like to encourage them to keep up the pace of their capital expansion. the capitalisation of most domestically focused banks is good by historical standards. however, a combination of high interest rate risk exposure and strong mortgage lending growth has been reported by a number of banks. in order for these banks to bear the risks in the medium term, it is important to ensure that their capital base is strong enough. i would now like to take a closer look at the situation of the two big banks, before turning my attention to the situation of the domestically focused banks. situation of big banks compared to 2009, the two swiss big banks saw a marked improvement in their profitability and capital situation last year. in 2010, these institutions reported combined net profits of around chf