Switzerland's Federal Banking Commission will go ahead with a plan to cap the amount of assets that UBS AG and Credit Suisse Group AG can accumulate in relation to their capital, according to Chairman Eugen Haltiner.

We are going ahead with the leverage ratio, Haltiner said in an interview at a conference in Zurich today. The commission has received the banks' replies to its proposal and is now discussing details, such as an exact definition of the ratio, he added. We plan to introduce the new rules by the end of the year at the latest.

Switzerland's two biggest banks may be forced to cancel dividends, stop share buybacks, shrink balance sheets and raise fresh capital to satisfy new requirements.

Discussions with the banks at the moment center on what assets to include in calculating a leverage ratio requirement, whether assets held outside of the balance sheet need to be included and whether government bonds may be excluded from calculations, Haltiner said. The commission is also addressing different accounting standards that banks use.

UBS and Credit Suisse, have seen their capital-to-assets ratio fall to about 2.5 percent last year from 7 percent in 1995, the Swiss National Bank said in its annual financial stability report. In the U.S., banks must have at least 5 percent, the central bank said.

The two Swiss banks and German rival Deutsche Bank AG are very low-capitalized compared to their U.S. peers, Haltiner said. Capital at least has to come up to a level that is competitive internationally, which is not yet the case.

The U.K. Financial Services Authority may also be considering tighter capital requirements for banks, according to Mr. Haltiner.