the strengthening of banks ’ self - regulation in january 2020 has led to a reduction in the share of new mortgages with a high loan - to - value ratio in the residential investment property segment. however, affordability risks as measured by the loan - to - income ratio have increased for new mortgages. the snb ’ s stress scenario analysis suggests that most domestically focused banks ’ capital buffers remain sufficient to cover the loss potential stemming from relevant stress scenarios. these include the scenario involving a severe recession and the scenario involving an interest rate rise with a simultaneous correction in real estate prices. however, these simulations also suggest that the capital ratios of certain banks could decline significantly and approach, or even fall below, the regulatory minimum requirements. given the risk exposures of these banks, adequate capitalisation is particularly important. the recent reactivation of the countercyclical capital buffer will help to maintain the banking sector ’ s resilience. the snb will continue to monitor developments on the mortgage and real estate markets closely, and to assess whether further measures are necessary to mitigate the risks to financial stability. page 3 / 3

bank financial institutions – legislation is needed here. judging from the actions of the past year, there are indeed institutions that are “ too big to fail ”, at least in certain circumstances. let ’ s set up a resolution framework that is robust and transparent so everyone understands the rules of the road and likely outcomes beforehand. an ad hoc approach increases uncertainty and reduces policymaker credibility. • if large systemically important institutions are indeed too big to fail, then there needs to be an explicit quid pro quo for this. otherwise, this implicit support will create moral hazard and discriminate against smaller institutions. in particular, important institutions cannot be allowed to stay outside in the sun during good times, but allowed to come inside the regulatory net when it is raining. • we need a more robust capital regime for banks. measures of regulatory capital lag far behind the real - time market - based measures of capital and risk. moreover, the capital regime is procyclical. banks are constrained in the amount of reserves they can build in good times as a buffer against cyclical downturns. finally, banks balk at cutting dividends to conserve capital or replenishing the capital they sorely need in the middle of crisis. these incentives reinforce the downward pressure on the financial system during times of stress. • we need a more effective regulatory system. we need a systemic risk authority that has both the responsibility and the powers to look across the entire financial system – both depository institutions and the capital markets. our regulatory regime is incredibly balkanized, which makes coordination difficult and means that important information can fall between the cracks. it also leads to less accountability for supervisory shortcomings and failures, which is another area where we have to do better. this list is just a hint of the agenda that lies ahead. we need to put our financial system into the repair shop for intensive reconstruction. we need to do this in order to rebuild confidence and to ensure that we do not repeat the type of financial boom and bust that has characterized this cycle. thank you very much for your kind attention, i would be happy to take questions.