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. while there has been a decline in the share of new mortgage loans with a high loanto - value ( ltv ) ratio since the last financial stability report, no trend towards lower affordability risks is discernible. third, they continued to carry a historically high level of interest rate risk in the banking book. as a result, these banks are particularly vulnerable to adverse scenarios which assume a significant interest rate increase coupled with a price correction on the residential real estate market. while domestically focused banks ’ exposure to risk is high, their current capital ratios are also significantly above the regulatory minimum. as a consequence, substantial capital buffers are available in the system to absorb losses from negative developments in the economic and financial environment. nonetheless, from a financial stability perspective, the banks ’ high exposure to risk, coupled with the imbalances on the mortgage and real estate markets, is a source of concern. the situation calls for a prudent lending policy, both to limit banks ’ future loss potential and to help prevent a further build - up of imbalances. bis central bankers ’ speeches regarding the latter, the different measures taken thus far by the authorities appear to have had some positive impact. measures such as the revision of the self - regulation rules in july 2012 and the activation of the countercyclical capital buffer ( ccb ) in early 2013, which contributed to strengthening banking sector resilience, seem to have helped contain market momentum. nonetheless, imbalances built up further in 2013, thereby justifying the increase in the level

jean - pierre danthine : situation at swiss banks from a financial stability perspective introductory remarks 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, 19 june 2014. * * * as my colleague thomas jordan has explained, economic and financial conditions continue to be challenging. against this background, i would like to examine the situation at swiss banks from a financial stability perspective, looking first at the big banks and then moving on to a discussion of domestically focused banks. big banks : strengthening resilience over the past year, the swiss big banks have further improved their capital situation. in terms of loss - absorbing capital – defined as common equity tier 1 capital plus high - trigger contingent capital instruments – their risk - weighted capital ratio either already exceeds or is close to the 13 % requirement that will apply from 2019. they also meet or are very close to meeting the corresponding leverage ratio requirement of 3. 1 %. in terms of total capital, both big banks have also substantially improved their ratios. however, they have yet to meet the corresponding requirements applicable from 2019. 1 the snb welcomes the significant progress made by the big banks in improving their capital situation and their compliance with some of the requirements applicable from 2019. the snb recommends that they continue to improve their resilience and, in particular, their leverage ratios. this is important for two reasons. first, the loss potential for the swiss big banks – estimated under the different adverse scenarios considered – continues to be substantial relative to their capitalisation. these adverse scenarios are not forecasts. they represent unlikely, highly unfavourable but coherent developments in economic and financial conditions. for financial stability in switzerland, it is important that the big banks remain adequately capitalised in the event of such scenarios occurring. in addition, irrespective of the scenario considered, substantial losses can also result from operational and legal risks, as recent experience has shown. second, an international comparison reveals an uneven picture of the swiss big banks ’ capitalisation, depending on which capital measure one examines. although their riskweighted ratios are above average for large globally active banks, the same cannot be said for their leverage ratios, as calculated according to various common definitions. leverage ratios are gaining in importance as a measure of banks ’ resilience. experience shows that these ratios quickly become the focus of market attention during a crisis. moreover, the international requirement,