The latter are primarily aimed at ensuring the maintenance of systemically important functions and the orderly resolution of the residual bank, and are therefore important in a “gone concern” perspective. BIS central bankers’ speeches  1  Increasing the credibility of model-based risk-weighted assets Increasing the credibility of risk-weighted assets (RWA) based on banks’ internal models remains an important goal. As discussed in the 2013 Financial Stability Report, model-based RWA are being called into question by market participants, analysts and authorities worldwide. This is particularly significant as RWA are at the heart of the capital regulations for banks. It is widely accepted that a bank’s risks can, in principle, be more accurately quantified using the model-based approach than using the standardised approach. Yet banks’ internal models are highly complex and can vary widely between institutions, thus making it difficult to accurately assess a bank’s resilience and compare one bank with another. The SNB welcomes the efforts by the Swiss big banks to increase transparency with regard to their risks. For example, both institutions recently started to disclose changes in their RWA, broken down by cause. Of particular interest is the proportion of the reduction in RWA which is attributable to model adjustments. In addition, Credit Suisse has been publishing a statistical measure of total loss potential for some time now, and UBS recently started to publish a statistical measure of loss potential by business division and a scenario-based post-stress capital ratio. The SNB encourages the big banks to further increase transparency with regard to their risks.

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.