Featured Product

    Fritz Zurbrügg of SNB on Key Findings from Financial Stability Report

    June 13, 2019

    Fritz Zurbrügg, Member of the Governing Board of SNB, at a news conference in Berne, presented the key findings from 2019 Financial Stability Report by SNB. He outlined the assessment of the situation at the domestically focused banks and discussed the capital position and resolution planning of the Swiss big banks—Credit Suisse and UBS.

    Mr. Zurbrügg highlighted that the global economic and financial market conditions that the Credit Suisse and UBS are facing have become slightly more difficult since the assessment this time last year. Nevertheless, further progress has been achieved in implementing the revised too-big-to-fail regulations. This holds true for both areas covered by the regulations—resilience and resolution. Regarding resilience, the Swiss big banks, Credit Suisse and UBS, have slightly improved their capital situation and are now close to full compliance with the look-through going-concern capital requirements on a consolidated basis. The current calibration of these regulatory requirements is necessary to ensure adequate resilience at both banks. The market’s assessment of the two big banks’ resilience is generally similar to that of the previous year. In the area of resolution, the Swiss big banks have improved their gone-concern loss-absorbing capacity since last year’s Financial Stability Report.

    He noted that the Federal Council has drawn up requirements on big banks’ loss-absorbing capacity at the level of individual group entities and, in early April, initiated a consultation on a corresponding amendment to the Capital Adequacy Ordinance. SNB supports the proposed amendments to the Capital Adequacy Ordinance. Work is also underway with regard to liquidity in a crisis, known as "funding in resolution." It is aimed to ensure that the big banks have sufficient liquidity during preparations for and in the phase immediately after resolution. To this end, FINMA is drawing up resolution funding plans in line with the international standards. In cooperation with SNB and the two banks concerned, it is assessing the big banks’ liquidity needs under possible crisis scenarios. Finally, both big banks are in the process of finalizing their Swiss emergency plans, in which they have to demonstrate that they would be able to maintain their systemically important functions without interruption in a crisis. According to FINMA, further efforts by the big banks are required to ensure their plans are finalized by the statutory deadline of end-2019.

    Mr. Zurbrügg mentioned that the mortgage and real estate markets remain the biggest source of risk for the domestically focused banks. Imbalances persisted in these markets in 2018. Banks’ current lending policy in the residential investment property segment should be viewed as particularly risky. Since many of the loans also carry considerable loan-to-value (LTV) risk, they are particularly vulnerable in a scenario involving a correction in real estate prices and a sharp increase in interest rates. Given the risks, SNB continues to take the view that targeted mortgage loan-related measures are necessary in the residential investment property segment. SNB supports the proposal of the Federal Council to raise capital requirements for high-LTV loans in this segment. Specifically, this would involve increasing the risk-weights for loan tranches exceeding two-third of the residential investment property’s value.

    SNB welcomes the Swiss Bankers Association’s readiness to consider a revision to the self-regulation guidelines as an alternative to the Federal Council’s proposal. Such a revision would reduce the LTV ratio and shorten the amortization period for new loans financing residential investment property. As per SNB assessment, the domestically focused banks hold sufficient capital to cover their risk exposure. SNB stress tests continue to suggest that most of these banks have a sound capital base, enabling them to cover any losses they might incur under adverse scenarios. The proposed measures should help to ensure that the level of risks incurred in the mortgage market remains bearable in the future. For its part, SNB will continue to closely monitor developments on the mortgage and real estate markets and will regularly reassess the need for an adjustment of the countercyclical capital buffer (CCyB).

     

    Related Links

    Keywords: Europe, Switzerland, Banking, Securities, Financial Stability, Too-Big-To-Fail, Capital Adequacy Ordinance, Loss-Absorbing Capacity, CCyB, Credit Risk, Stress Testing, Resolution Planning, SNB

    Featured Experts
    Related Articles
    News

    ISSB Sustainability Standards Expected to Become Global Baseline

    The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.

    September 18, 2023 WebPage Regulatory News
    News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.

    September 18, 2023 WebPage Regulatory News
    News

    BCBS Assesses NSFR and Large Exposures Rules in US

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.

    September 14, 2023 WebPage Regulatory News
    News

    Global Agencies Focus on ESG Data, Climate Litigation and Nature Risks

    At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.

    September 14, 2023 WebPage Regulatory News
    News

    ISSB Standards Shine Spotlight on Comparability of ESG Disclosures

    The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures

    August 22, 2023 WebPage Regulatory News
    News

    EBA Issues Several Regulatory and Reporting Updates for Banks

    The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.

    August 10, 2023 WebPage Regulatory News
    News

    BCBS Proposes to Revise Core Principles for Banking Supervision

    The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.

    August 04, 2023 WebPage Regulatory News
    News

    US Proposes Final Basel Rules, Transition Period to Start in July 2025

    The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.

    August 04, 2023 WebPage Regulatory News
    News

    FSB Report Outlines Next Steps for Climate Risk Roadmap

    The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.

    August 04, 2023 WebPage Regulatory News
    News

    EBA Plans on Ad-hoc ESG Data Collection and Climate Scenario Exercise

    The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.

    July 31, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8931