(Member of the executive board at the ECB) “Globalisation, international financial integration and the financial crisis: The future of European and international financial market regulation and supervision”, speech held on 19 February 2010, www.ecb.org. González-Páramo J.M. (Member of the executive board at the ECB) “Cross-border banking in the EU: developments and emerging policy issues”, speech held on 24 February 2006, www.ecb.org. Helpman E., Melitz M.J. and Yeaple S.R. (2004), “Export vs. FDI with heterogeneous firms”, American Economic Review, vol. 94, pp. 300–316. Heuchemer S. Kleimeier S. and Sander H. (2008), “The Geography of European CrossBorder Banking: The Impact of Cultural and Political Factors”, Maastricht University METEOR Research Memorandum No. RM/08/008. Horstmann I. and Markusen J. (1992), “Endogenous market structures in international trade (natura facit saltum)”, Journal of International Economics vol. 32, pp 109–129. Markusen J.R. and Venables A.J. (1998), “Multinational firms and the new trade theory”, Journal of International Economics, vol 46, pp. 183–203. Markusen J.R. and Venables A.J. (2000), “The theory of endowment, intra-industry and multinational trade”, Journal of International Economics, vol. 52, pp. 209–234. National Bank of Greece, Annual Report 2009, www.nbg.gr. Navaretti G., Calzolari G., Pozzolo A. and Levi M. (2009) “Multinational Banking in Europe: Financial Stability and Regulatory – Implications Lessons from the Financial Crisis”, Centro Studi Luca D’Agliano Development Studies, Working Paper, No. 292. Schoenmaker, D. (2010), “The Financial Trilemma at Work in Europe”, Working Paper, SSRN1340395. The International Monetary Fund, World Economic Outlook Database, April 2010. The Turner Review (March 2009) “A regulatory response to the global banking crisis”, www.fsa.gov.

Although their profitability continued to decline in the first half of 2020, this development was driven by a further narrowing of the interest rate margin. There has been hardly any increase in value adjustments and write-downs. Moreover, domestically focused banks are not reporting any significant rise in impaired loans at present. Despite the  Page 2/4  Zurich, 17 December 2020 Fritz Zurbrügg  News conference  economic downturn, mortgage lending volume and residential property prices have also continued to increase over the last six months. However, this does not mean that domestically focused banks will remain unaffected by the economic consequences of the pandemic. Experience shows that there is typically a lag before the impacts of recessions on banks become evident. In the baseline scenario, the profitability of domestically focused banks is likely to come under further pressure. First, the anticipated deterioration in credit quality is expected to lead to increased value adjustments and write-downs on loans to Swiss companies. Second, the interest margin is expected to narrow further due to the persistent low interest rate environment. While domestically focused banks should remain profitable in aggregate, against this background, some of them are expected to incur losses. Uncertainty about the future course of the coronavirus pandemic remains high. In this context, the increased vulnerability of the domestic mortgage and residential real estate markets presents an additional risk factor for the banks.