Swiss regulator warns of mortgage market risk

Finma director warns of risks in the Swiss mortgage market Keystone-SDA

The Swiss Financial Market Supervisory Authority (Finma) fears that financial centre risk is becoming increasingly tense. Developments in the mortgage market are particularly worrying.

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“Prices have continued to rise and the risk of a correction is correspondingly high,” warned Finma director Stefan Walter in an interview with Blick.

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Above all, Walter criticised the fact that many banks were making excessive use of their internal affordability criteria. “At many institutions, the exceptions are between 25% and 40% of the mortgage lending.” This is neither in the interests of the bank nor its customers.

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In its annual risk report at the beginning of the week, Finma also pointed out that the lending criteria were too lax. When asked why nothing was changing, Walter pointed to the great competitive pressure: growth in a saturated market is difficult.

The cost of financing homes has risen, for example. “There is a great temptation for financial institutions to make certain exceptions because things have gone well in the past.” If Finma realises that a bank is going too far in this respect, it will intervene.”

External risks rise

At the same time, Walter emphasised external risks for the Swiss financial centre in the interview. These have intensified. “Sanctions, sovereign debt, geopolitical disputes, high prices on the stock markets, risk premiums on corporate and government bonds – all of these can be dangerous for the Swiss financial centre.”

For Walter, in view of this mixed situation, “resilience is the order of the day for all financial institutions in Switzerland. Because crises and shocks usually come from outside.” They are also possible at any time. Banks and other financial institutions must therefore be well managed and have the risks under control.

With regard to regulation, Walter explained that Finma does not publicise bank names as long as no additional capital buffers are required. At the same time, he called for the possibility of imposing fines: “It must apply to all banks, otherwise the impression could arise that we are only scrutinising the big ones.”

When asked about UBS, he said: “UBS’s total assets are significantly larger than Switzerland’s annual economic output. That’s why we need higher standards.”

Translated from German by DeepL/mga

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