Jean-Pierre Danthine: Situation at Swiss banks from a financial stability perspective Introductory remarks by Mr Jean-Pierre Danthine, Vice Chairman of the Governing Board of the Swiss National Bank, at the media news conference of the Swiss National Bank, Berne, 19 June 2014. *  *  *  As my colleague Thomas Jordan has explained, economic and financial conditions continue to be challenging. Against this background, I would like to examine the situation at Swiss banks from a financial stability perspective, looking first at the big banks and then moving on to a discussion of domestically focused banks. Big banks: strengthening resilience Over the past year, the Swiss big banks have further improved their capital situation. In terms of loss-absorbing capital – defined as Common Equity Tier 1 capital plus high-trigger contingent capital instruments – their risk-weighted capital ratio either already exceeds or is close to the 13% requirement that will apply from 2019. They also meet or are very close to meeting the corresponding leverage ratio requirement of 3.1%. In terms of total capital, both big banks have also substantially improved their ratios. However, they have yet to meet the corresponding requirements applicable from 2019.1 The SNB welcomes the significant progress made by the big banks in improving their capital situation and their compliance with some of the requirements applicable from 2019. The SNB recommends that they continue to improve their resilience and, in particular, their leverage ratios. This is important for two reasons.

It continues to recommend that the big banks disclose RWA according to both the model-based approach and the model-independent standardised approach. This recommendation is in line with increasing efforts being made at international level. Disclosing RWA according to the standardised approach would provide market participants with additional information for assessing the level of, and changes in, model-based RWA. In this context, the analysis of RWA being carried out by FINMA with the support of the SNB will play an important role. The big banks have already provided the necessary data by calculating RWA based on the standardised approach. Now the analysis will focus on the question of whether, and why, RWA based on the banks’ internal models differ from those based on the model-independent standardised approach. Differences must be well explained and have a sound economic rationale. If the analysis does not reveal any substantial and inexplicable differences, this would strengthen the credibility of the model-based approach. Conversely, if substantial differences cannot be explained, corrective measures would need to be considered. Domestically focused commercial banks I would now like to turn to the domestically focused commercial banks. In 2013, these banks further increased their already high exposure to mortgage and real estate market risk. First, growth in domestically focused banks’ mortgage lending was almost unchanged from the previous year. By contrast, the big banks’ lending growth decreased significantly in 2013. Second, domestically focused banks’ risk appetite in mortgage lending remained high overall.