news conference berne, 15 june 2017 fritz zurbrugg introductory remarks by fritz zurbrugg in my remarks today, i will present the key findings from this year ’ s financial stability report, published by the swiss national bank this morning. in the first part of my speech, i will look at the situation of the big banks, focusing on the progress made in implementing the revised ‘ too big to fail ’ regulations ( tbtf2 ) that came into effect almost a year ago. in the second part of my remarks, i will outline our current assessment of the situation at domestically focused banks. big banks let me start then with the big banks and the tbtf2 regulations. the revised regulations are designed to resolve the ‘ too big to fail ’ issue in switzerland, so that systemically important banks no longer have to be bailed out with taxpayers ’ money in the event of a crisis. the tbtf2 regulations rest on two complementary pillars. first, they are aimed at strengthening the resilience of systemically important banks in a going - concern perspective. they therefore specify higher requirements for going - concern capital in particular, thereby reducing the likelihood of a systemically important bank getting into financial distress. second, if a systemically important bank nevertheless gets into financial distress – this is called the gone - concern perspective – the regulations provide a framework for orderly resolution, ensuring the continuation of systemically important functions without the use of public funds. to this end, the regulations stipulate requirements both for loss - absorbing capacity in a gone - concern perspective and for resolution planning. what progress have the two big banks made in implementing the tbtf2 regulations? regarding the first pillar, resilience, both big banks have improved their loss - absorbing capacity in a going - concern perspective since the last financial stability report. with this further improvement, credit suisse and ubs are on track to meet the final capital page 1 / 3 berne, 15 june 2017 fritz zurbrugg news conference requirements. 1 in a going - concern risk - weighted perspective, both banks are already fully compliant. however, a further improvement is necessary with respect to the leverage ratio. the snb acknowledges the progress made in improving the capital situation. achieving full compliance with the tbtf2 regulations will further strengthen loss - absorbing capacity. this is necessary as the big banks ’ loss potential relative to their capitalisation continues to be substantial, when measured on the basis of the stress tests carried out by the snb

as well as the losses experienced during the last financial crisis. given the big banks ’ significance to the swiss economy, it is important that they remain adequately capitalised in the event of such losses occurring. this brings me to the second pillar of the tbtf2 regulations – resolution. here, too, both big banks have made progress. on the one hand, since june 2016, credit suisse and ubs have significantly improved their gone - concern loss - absorbing capacity. to this end, they issued further bail - in bonds, which can be converted into equity in the event of impending insolvency. on the other hand, the two big banks have implemented key organisational measures. for instance, they have both set up swiss subsidiaries that contain their systemically important functions, including, in particular, domestic deposit and lending business. in order to resolve the ‘ too big to fail ’ issue in switzerland, more progress also needs to be made in the area of resolution. this will involve, first, further improvements in gone - concern loss - absorbing capacity in a gone - concern perspective, as stipulated in the regulations and, second, further progress in drawing up robust resolution plans. by end - 2019, the big banks will need to demonstrate that they would be able to maintain their systemically important functions in switzerland without interruption in the event of impending insolvency. the resolution plans will also need to meet foreign regulatory requirements. domestically focused commercial banks i will now turn to domestically focused commercial banks, whose main business is in lending and deposit - taking. i would like to highlight three key developments at these banks. first, domestically focused banks further increased their risk exposure in 2016. mortgage growth at these banks remained strong. moreover, their interest rate risk exposure from maturity transformation continued at high levels. in addition, they took on greater affordability risks and the share of new mortgages with a high loan - to - income ratio reached a new peak. all this took place against the background of high imbalances on the swiss mortgage and real estate markets. although these imbalances declined slightly in 2016, they are still at levels similar to those in 2014, when the sectoral countercyclical capital buffer ( ccyb ) was set at 2 %. 1 final requirements refer to the requirements that will apply after expiry of all transitional provisions, and in particular to the qualitative requirements for going - concern capital. page 2 / 3 berne, 15 june 2017 fritz zurbr