SNB's Jordan: Worse euro crisis may hit Swiss: report

(Reuters) - Big Swiss banks have very little direct exposure to Greece but Switzerland may be affected if a Greek default destabilizes the whole financial system, the Swiss National Bank's vice chairman told a newspaper on Sunday.
In remarks similar to those he made at the SNB's monetary policy review on Thursday and in the SNB's annual Financial Stability Report, Thomas Jordan said a domino effect brought about by a Greek debt restructuring likely would cause further upwards pressure on the Swiss currency.
Concerns about debts in peripheral euro zone countries have repeatedly pushed the safe-haven Swiss franc to record peaks against the euro this year. Swiss exporters have complained their margins are suffering and the SNB has decided to leave rates ultra-low to keep a lid on the rising currency, running the risk of a bubble in the real estate market.
"So long as only the peripheral countries are affected, the risk is limited," Thomas Jordan told the newspaper Der Sonntag. "But the big Swiss banks necessarily have many investments abroad, in particular in countries with big financial markets. If the whole financial system were affected, that would naturally have severe consequences for Switzerland."
Switzerland had to bail out UBS during the financial crisis after it suffered big writedowns and the government is now pushing tough capital standards for UBS and rival Credit Suisse that exceed the Basel III standards.
In its report, issued last Thursday, the SNB said the banks' direct exposures to peripheral euro zone countries were relatively low, falling to 46 billion francs in 2010 from 60 billion in 2009, but they could face "considerable losses" if the contagion worsened.
Echoing remarks made by SNB Chairman Philipp Hildebrand last year, Jordan said it was in Europe's interest to solve the debt problem quickly and effectively.
"We're convinced that the European institutions will take appropriate measures that will prevent an escalation of the crisis," he said.
Switzerland is not a member of the European Union but has funded part of the IMF's loan to Greece.
"But also Switzerland has a big interest in the debt crisis not escalating. Via the exchange rate and demand for our exports we're very much affected by these developments."
Between March 2009 and June 2010 the SNB intervened in markets to prevent an excessive appreciation of the franc against the euro. As a result of its interventions, the SNB ran up its biggest annual loss last year and Hildebrand has faced calls for his resignation.
The SNB holds just over 80 percent of its foreign currency reserves in government fixed income. Of its bond holdings, 83 percent are in paper rated AAA, 14 percent in debt with a AA rating, 1 percent has only an A rating and 2 percent is in a category called 'other,' the SNB's website shows.
In a separate article, Der Sonntag said the SNB held a very small amount of Greek debt.
In January the SNB stopped accepting Irish government debt as collateral in its money market operations and stopped accepting Greek debt more than a year ago.
(Reporting by Catherine Bosley; Editing by Andrew Callus)