Swiss banks overall are not engaging in risky mortgage lending although there are some exceptions, according to the Swiss banking regulator.
Swiss property prices from Zurich to Geneva have risen because of the central bank’s loose monetary policy with interest rates close to zero. An influx of skilled immigrants has also contributed to that increase.
In a bid to guard against the risks posed by the country’s biggest property boom in two decades, the Swiss government last month ordered banks to hold additional capital.
“Across the board we’ve not seen a careless credit policy,” FINMA Director Patrick Raaflaub said at a press conference in Bern today, adding there are significant differences among geographic regions and among banks’ policies. “The spectrum here is wide and goes from careful to the attribute risky.”
Banks will be forced to hold an extra 1 percent of risk-weighted assets linked to domestic residential mortgages, with the new rules to be enforced from Sept. 30. FINMA regularly also conducts tests to ensure mortgages are backed by sufficient assets.
The bulk of mortgages in Switzerland are held by smaller regional and cantonal banks.
FINMA also has an eye on insurers, many of whom have large property holdings, though their activities involve less risk, Raaflaub said: “We expect insurers to continue to behave in a conservative manner.”
Switzerland’s two biggest banks, UBS AG and Credit Suisse Group AG, have been subjected to the so-called ’’Swiss Finish,’’ a capital-adequacy standard that goes beyond the Basel III global requirements.
’’Both big banks have capital building ahead -- both are well on their way on their development paths,’’ Raaflaub said in response to a question about the two banks’ capital. “So we have no immediate reason to intervene.”