Switzerland sets tough capital goals for its biggest banks

* New (KOSDAQ: 160550.KQ - news) leverage rules for UBS (NYSEArca: FBGX - news) , Credit Suisse (LSE: 0QP5.L - news)

* Leverage ratio of 5 pct from 2019

* Credit Suisse CEO says rules consistent with bank's plans (Adds comment from UBS)

By Joshua Franklin

ZURICH, Oct (HKSE: 3366-OL.HK - news) 21 (Reuters) - Switzerland on Wednesday outlined tough new capital requirements for its two biggest banks, UBS and Credit Suisse, to protect the economy from a major banking collapse.

Solving the "too big to fail" problem has been a priority for U.S (Other OTC: UBGXF - news) . and European regulators after several banks, including UBS, were bailed out by taxpayers in the financial crisis.

"Once they are implemented by the banks concerned, the too-big-to-fail risks in Switzerland will once again be significantly reduced," the government said in a statement.

From the end of 2019, the banks must have a leverage ratio of 5 percent with at least 3.5 percent made up of high-quality common equity tier 1 (CET1) capital, the government said.

The rest can be made up by so-called contingent convertible bonds (CoCos) that can be converted into equity in a crisis, to help provide a capital cushion.

The leverage ratio aims to curb bank risk-taking by putting a cap on debt levels. The banks must also hold 5 percent capital in bonds that can be used to bolster the bank in an emergency.

Along with Switzerland, the United States and Britain have been among the most proactive in setting new capital targets for their biggest banks.

Britain's requirement is for a leverage ratio of 4 percent or above and in the United States it is 5-6 percent.

Switzerland's central bank, which worked with the country's finance department on the new rules, said Switzerland needed to take a leading role in setting tough capital requirements.

"The new measures will considerably strengthen the resistance of the Swiss banking system," Swiss National Bank Chairman Thomas Jordan told a news conference. "We don't expect negative effects on the Swiss economy."

The government left its CET1 requirement unchanged at 10 percent of risk-weighted assets, but increased the requirement for capital in a crisis to 14.3 percent from 6 percent.

The finance department will hold a hearing about the new rules and submit the texts of the ordinances to the government by the first quarter of 2016.

Credit Suisse Chief Executive Tidjane Thiam told analysts on Wednesday that the requirements were fully consistent with the bank's plans.

The bank is targeting a leverage ratio of 5-6 percent on a tier 1 capital basis by the end of 2017, and a ratio of 3.5-4 percent of common equity.

UBS said it would meet new Swiss capital rules by the time they came into force. (Additional reporting by Silke Koltrowitz and Steve Slater; Editing by David Clarke and Pravin Char)