Switzerland's two large banks, UBS and Credit Suisse, could weather a severe deterioration of the economy, Swiss banking regulator FINMA said on Friday, publishing its conclusion from a stress test for the banks.

The test assumed a deep, worldwide recession, accompanied by a significant deterioration in the finance and property markets, FINMA said.

The large banks are expected to demonstrate after application of the above mentioned scenario a Tier 1 ratio of above 8 percent, FINMA said.

Both large banks currently meet FINMA's requirements, which are rigorous by international standards, it said.

Despite the positive nature of this result, FINMA still expects the large banks to continue in their efforts to both improve their capital base as well as the reduction of their leverage, FINMA said.

(Reporting by Sven Egenter)