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

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News

    EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules

    The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.

    October 31, 2023 WebPage Regulatory News

    BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks

    As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.

    October 19, 2023 WebPage Regulatory News

    BCBS and EBA Publish Results of Basel III Monitoring Exercise

    The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.

    October 18, 2023 WebPage Regulatory News

    PRA Updates Timeline for Final Basel III Rules, Issues Other Updates

    The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.

    October 18, 2023 WebPage Regulatory News

    US Treasury Sets Out Principles for Net-Zero Financing

    The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.

    October 17, 2023 WebPage Regulatory News

    EC Launches Survey on G7 Principles on Generative AI

    The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.

    October 14, 2023 WebPage Regulatory 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

    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

    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
    RESULTS 1 - 10 OF 8938