Swiss banks have so far weathered the impact of the Covid-19 pandemic well, according to Swiss National Bank (SNB) chairman Thomas Jordan.

However, he cautioned that a strong franc could pose a problem for the Swiss financial industry.

“The global spread of coronavirus has led to a sharp deterioration in the economic environment and financial market conditions. Nonetheless, banks in Switzerland have so far withstood the effects of the pandemic well,” Jordan said in a keynote speech at the Lugano Banking Day on Monday.

Jordan said the Swiss franc was one of the most solid currencies in the world and as such tended to appreciate strongly in times of high uncertainty.

“We have witnessed this again recently,” he said, adding the central bank's negative interest rate and willingness to intervene in the foreign exchange market served to counteract the attractiveness of Swiss franc investments.

The SNB said last month it was ready to buy more foreign currency to ease appreciation of the safe-haven franc. It kept its policy interest rate and the rate it charges on sight deposits at minus 0.75%.

“In general, an overvalued Swiss franc can pose a problem for the financial industry too,” Jordan said, citing banks' wealth management businesses, where returns mainly accrued in foreign currencies while costs were incurred in francs.

Jordan said the SNB depended on an efficient and effective financial sector that transmitted the central bank's monetary policy to the Swiss economy by granting loans.

He said the supply of credit and liquidity to small and medium-sized enterprises in Switzerland was currently working well.

He warned against setting administrative hurdles that limit the activities of the financial service sector unnecessarily and without bolstering stability.

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