(AWP) Swiss domestic banks proved resilient in the face of deteriorating economic conditions in 2020. In the opinion of the Swiss National Bank (SNB (SNBN 5’280.00 0%)) Most of them also survive an additional external shock.
The capital buffers of the domestic banks are a decisive element in their resilience, emphasized the SNB in its “Report on Financial Stability 2021” published on Thursday. After all, the capital buffers not only determine how many loans a bank can issue. They also help the institutes to cope with possible losses.
And the leverage and risk-weighted capital ratios of the domestic banks are currently at a historically high level, emphasized the SNB. Accordingly, they would be well above the minimum regulatory requirements.
A scenario analysis by the SNB suggests that “most” institutions would also survive a storm such as a prolonged recession in the euro area, the USA or an interest rate shock. “Some” banks would still fall below the regulatory minimum.
Real estate market risk
The SNB is once again throwing a special spotlight on the domestic real estate market. The domestically oriented banks have further increased their exposure in the area, which is cause for concern.
According to the SNB, the probability of a correction on the mortgage and real estate market as a result of the pandemic has decreased due to the brighter economic outlook. The mortgage volume of the domestic banks also rose somewhat more slowly at 3.7% than in the previous year (+ 4.0%). At the same time, however, the affordability risks have risen to a new high. This applies in particular to investment properties.
The SNB will therefore continue to closely monitor developments on the mortgage and real estate markets, said the monetary authorities. They will also regularly examine the need to reactivate the so-called countercyclical capital buffer.
The SNB lifted the buffer in the wake of the Corona crisis in spring 2020 so that the local banks can receive more liquidity and better supply the local economy with loans. The instrument was introduced around nine years ago and was intended to contain the risks of a real estate bubble.
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