Switzerland: Financial System Stability Assessment

International Monetary Fund

No 2019/183, IMF Staff Country Reports from International Monetary Fund

Abstract: Swiss financial institutions are well capitalized and could withstand the severe shocks under the adverse stress test scenarios, but macrofinancial vulnerabilities are deepening. Important reforms have been made since the 2014 FSAP, but several critical recommendations and emerging challenges have yet to be fully addressed. Capital buffers have increased across all categories of banks, and while the two global systemically important banks have downsized and deleveraged significantly since the global financial crisis, since 2013 they have been growing again. Macroprudential measures have not been taken since 2014 and is constrained by having only one mandated tool and a self-regulation agreement with banks. The financial supervisor (FINMA) has developed into a trusted supervisor, but as a small entity, it relies heavily on external auditors to conduct on-site supervision; the associated conflict of interest and supervisory objectivity risks need to be carefully managed. The combination of an ex-post funding mechanism, a low cap on banks’ contributions, and a private deposit insurance agency run by active bankers, weakens the crisis management arrangements.

Keywords: ISCR; CR; interest rate; banking sector; financial system; return on equity; market share; resolution regime; cantonal bank; staffing resource; risk profile; investment funds; Insurance companies; Stress testing; Mortgages; Commercial banks; Bank resolution framework; Global (search for similar items in EconPapers)
Pages: 60
Date: 2019-06-26
New Economics Papers: this item is included in nep-acc, nep-ias and nep-mac
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