entities, the basel minimum standards create a reasonably level playing field between all competitors worldwide. because they are implemented differently from one country to the next, the playing field might not be perceived as being fully level. but it is at least much more even than it would be without the bcbs. arbitrage is significantly supressed. a second benefit is that for entities operating internationally, the rules are more consistent across the countries in which they conduct business. thus, the rules are more easily understood and implemented. 2 / 4 bis central bankers'speeches for supervisors, the benefits are quite obvious. by working together, we help establish good regulation. the basel standards are drafted by experts from all around the globe. if every member state were to start designing their own regulation from scratch, i am sure that basically none of them would match the quality of the committee ’ s work. and what is good for supervisors is also good for the financial system as a whole. safeguarding financial stability is not something we can do at the national level alone if the entities we supervise are acting internationally. but i do not want to play down the downsides. international standards follow a one - size - fits - all approach. some rules are not fit for purpose in every jurisdiction. national specificities may not be addressed. the standards are intended for banks that operate internationally. in germany, however, small and medium - sized banks make up more than two - thirds of the market share, and these banks are not the target of these standards. the large volume of bank loans as a ratio of funding via capital markets makes the impact of the standards on the financial economy much bigger. and the widespread use of internal models for risk calculation is seen as a circumvention of the standards. 4 a way forward for global standards for digital innovation having spoken about the fundamentals of international cooperation in banking regulation, i would now like to widen my focus. as you are digital experts, i am very much interested in your views on the standardisation of regulation of digital innovation. in banking, just like in many other industries, we see a lot of benefits stemming from new technologies. let me make three points in this regard : 1. there is a clear case for international digital innovation standards. digital innovation is global by nature. regulatory arbitrage is a common feature in the world of today. digital innovation needs scaling up. otherwise, the huge investments will not pay off. divergence in the legal environment is costly and could ultimately

’ going and gone - concern loss - absorbing capacity as well as improve their resolvability in a crisis. both of these sets of requirements must be addressed if switzerland ’ s ‘ too big to fail ’ problem is to be solved. domestically focused banks i would now like to turn to the domestically focused banks. these institutions ’ biggest risks continue to stem from the mortgage and real estate markets. i will make three points in this regard. first, imbalances on the mortgage and real estate markets persist. although mortgage growth has remained relatively low in 2017 – as in the previous year – developments on the real estate market show a somewhat different picture : price growth in the residential property segment 2 had been falling since 2013, but recently transaction prices have started to pick up again. moreover, with the exception of a few quarters ( including the third quarter of 2017 ), prices in the residential investment property segment have risen markedly since 2013. as prices over this period have increased more strongly than fundamentals such as rents, risks have accumulated in this segment ; it is thus especially vulnerable to a substantial correction in the medium term. this situation is compounded by brisk construction activity in the rental apartments segment, which could lead to oversupply. signs of this can already be seen in rising vacancy rates. second, the risk appetite of domestically focused banks remains high. this is particularly evident from the affordability risk data. the share of new mortgages with high loan - to - income ratios has risen significantly in recent years and has reached a historical high. the interest rate risk of domestically focused banks likewise remains high, while their interest margin continued to decline in the first half of 2017. as long as there is pressure on margins, incentives for domestically focused banks to increase risk - taking will remain substantial. third, notwithstanding the risks in the macroeconomic environment and the banks ’ high risk appetite, snb stress tests continue to suggest that, overall, domestically focused banks ’ resilience remains adequate. thanks to robust capitalisation, most of these banks would be able to absorb the losses likely to be incurred in adverse scenarios ; given the risks i have outlined, this is welcome. in the future, too, it will be decisive for the stability of the financial system that banks hold sufficient capital to cover the risks on their books – irrespective of ongoing margin pressure. 2 single - family houses and privately - owned apartments. page 2 / 3 berne, 14 december 2017 fritz zurbrugg news conference the