Finma recently announced that it would be scrutinizing Swiss banks in connection with the Danske Bank scandal.
(Photo: Reuters)
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Zürich The Swiss Financial Market Authority (Finma) warns of the effects of the corona crisis on banks and insurance companies in the country. Thanks to the liquidity and capital buffers built up over the past few years, the financial institutions could have cushioned the first wave of the crisis well, according to the authority’s annual risk monitor published on Wednesday. “The effects of the corona pandemic will continue to affect the financial markets for months, if not years.”
The turbulence on the money markets in the spring exposed the weak points in the liquidity management of banks and money market funds. “A return of such market turbulence and the resulting decline in liquidity would therefore represent a significant short-term risk for Swiss and other financial institutions,” it said.
It is also unclear how quickly the world economy will recover. This increases the likelihood that companies will go bankrupt. Finma therefore now counts among the main risks for Swiss financial institutions the default of corporate loans or bonds abroad.
Globally active Swiss institutions, especially the two big banks UBS and Swiss credit, loans would be granted to corporate customers outside of Switzerland that would not or only partially be resold to investors. “Permanent or temporary adjustments in the value of these loans as a result of the pandemic can therefore put a strain on the banks’ earnings.”
More: UBS and Credit Suisse are reportedly talking about merger – global deal unlikely
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