With respect to bank capitalisation, the situation remained largely unchanged in 2014. First, the domestically focused commercial banks’ leverage ratios remained stable at high levels by historical standards. Second, these banks’ risk-weighted capital ratios increased slightly and are significantly above regulatory minimum requirements overall. Furthermore, stress test results suggest that most domestically focused banks should be able to absorb estimated losses without seeing their capitalisation fall below the regulatory minimum. Nevertheless, under the most relevant adverse scenarios for these banks, the losses would deplete a large proportion of their surplus capital. Experience in Switzerland in the 1990s, as in other countries, suggests that this would lead to a general weakening of the banking sector and significantly affect banks’ ability to lend, with negative and lasting repercussions for the real economy. The stress test results highlight the importance of banks holding significant capital surpluses relative to the regulatory minimum requirements. The activation of the countercyclical capital buffer in 2013 and its increase in 2014 has made a significant contribution in this respect. 2  BIS central bankers’ speeches  Risk of renewed increase in imbalances on mortgage and real estate markets Overall, imbalances on the mortgage and residential real estate markets have remained broadly unchanged since the last Financial Stability Report. From a financial stability perspective, this is a positive development. However, it is still too early to give the all-clear. On the one hand, imbalances remain at a high level and have not yet started to decline.

These can only be partially explained by differences in the level of risk taken by the banks. Cf., for example, Basel Committee on Banking Supervision, Regulatory consistency assessment programme (RCAP) – Analysis of risk-weighted assets for market risks, January 2013; cf. also EBA, Interim results of the EBA review of the consistency of risk-weighted assets, 26 February 2013; Barclays, The dog that dug, 21 September 2012. Studies at national level have also shown that model-based RWA are too low in some cases. Cf. FINMA Annual Media Conference, “Models and their limitations”, 31 March 2015. BIS central bankers’ speeches  1  To address this problem, regulatory initiatives have been launched at international and national level. At international level, the Basel Committee on Banking Supervision is fundamentally revising the standardised approach. The Committee is also examining the introduction of a floor for internally modelled RWA based on this revised standardised approach. One important objective of the floor would be to ensure that capital requirements based on banks’ internal models do not fall below a prudent level. At national level, FINMA – together with the big banks and with the support of the SNB – has conducted a comparison between RWA calculated using the model-based and standardised approaches. The results of this comparison, in addition to the measures already taken by FINMA and those expected at the international level, will be taken into account by a working group led by the Federal Department of Finance.