Jean-Pierre Danthine: The Swiss National Bank’s 2012 Financial Stability Report Speech 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, 14 June 2012. *  *  *  Introductory remarks by Jean-Pierre Danthine I, too, would like to welcome you to this news conference, which for me is also the occasion to present the 2012 edition of the Swiss National Bank’s Financial Stability Report. The report contains the SNB’s assessment of the risks to the stability of the Swiss banking system, and of the need for action. This promotes risk awareness among Swiss banking sector agents, thereby contributing to financial stability. Introduction Economic and financial conditions for the Swiss banking sector have deteriorated since the last Financial Stability Report. The sovereign debt crisis escalated, threatening to spill over from peripheral euro area countries to the core countries of the euro area. In addition, global economic growth lost momentum and tensions grew in the international banking system. There was, likewise, no easing of tension on the Swiss mortgage and real estate markets. The momentum observed in real estate prices and mortgages continued. As my colleague, Thomas Jordan, has already mentioned, under its baseline scenario the SNB expects a gradual improvement in economic and financial conditions over the next 12 months. Although this is considered to be the most likely scenario, the risk of a renewed deterioration in the environment remains high.

At end-March 2012, the share of loss-absorbing capital in the net balance sheet total was 2.7% at UBS and only 1.7% at Credit Suisse. This capital would, for example, be insufficient to absorb losses such as those experienced by UBS in the recent financial crisis (over 3% of the net balance sheet total). In addition, the question remains as to what extent the reduction of risk-weighted assets is matched by an effective reduction of economic risks, if the balance sheet total remains unchanged. For these reasons, the SNB considers that it is essential for both big banks to further strengthen their resilience. It recommends that UBS continue with the capital strengthening process – including, in particular, pursuing a policy of dividend restraint. Credit Suisse, meanwhile, should accelerate its process and take all action necessary to expand its lossabsorbing capital base significantly during the current year. The SNB also recommends that both big banks increase their transparency with regard to resilience. Concretely, they should publish information on their capitalisation as defined under Basel III once fully implemented – as, indeed, UBS has done in the two most recent presentations of its quarterly results. They should also regularly calculate and disclose their risk-weighted assets according to the Basel standardised approach. The results of such calculations would provide a basis for comparison with risk-weighted asset figures calculated using internal risk models. This comparison would enable the ongoing reduction of risks to be presented more transparently. Implementing these two measures is necessary from a financial stability perspective.