This is the theme on which Finma alarmed most: There is a “clear tendency to overheat” in residential real estate, Urban Angehrn warned. Director of the Swiss financial center’s gendarme since last November, he estimated that “several factors point to an overvaluation of such goods”.
During the institution’s annual press conference in Bern on Tuesday morning, the successor to Mark Branson, who left to lead his German counterpart, recalled that “real estate prices have risen more than consumer prices, wages or GDP over the past 20 years”. A trend, added the former chief investment officer of Zurich Insurance Group, which has accelerated since the pandemic.
Need for recapitalization
However, in the event of a severe real estate crisis, banks and insurance companies would see their own funds fall below legal requirements, forcing them to recapitalize, Urban Angehrn warned. The latter recalled that the Swiss mortgage market and its 1,100 billion francs are larger than the balance sheet of a major bank and represent one and a half times Swiss GDP. For example, the manager clearly opposed a relaxation of mortgage lending, which would cause property prices to rise even further.
Also read: Towards the end of cheap mortgages?
The risks associated with real estate are one of the reasons why Finma has emphasized the importance of sound capitalization of banks and of implementing the latest recommendations of international regulations (Basel III) in this area. The regulator believes the financial center is stable, making it well-positioned to “seize the opportunities of digitization and joint efforts for greater sustainability,” said Marlene Amstad, who became president of Finma last year. of the board of directors since 2016.
“Strict” enforcement of sanctions
As for the war in Ukraine, it creates “multiple risks for the Swiss financial sector, even particularly acute risks for certain institutions,” warned Urban Angehrn. Without representing “a general risk for the Swiss financial market”. In fact the manager speaks of “business relations” [qui] are certainly not unimportant, but remain rather modest compared to the main target markets of the banks.
Also read: Credit Suisse and UBS have mitigated risks related to Russia
Finma focuses on financial risks (loans to Russian debtors, derivatives transactions, Lombard loans or trade in commodities) and compliance. The authority expects “strict compliance with the sanctions”, but ensures “for now it has no idea that this would not be the case”, confirms Urban Angehrn. For the latter, it is clear that the “banks take the subject of sanctions very seriously”. A theme that isn’t new, but the volume and complexity of which has “increased significantly,” he added.
Also read: Swiss banks highly involved in derivatives on Russia
Urban Angehrn also warned of the increased risk of cyber-attacks in the context of the Russian invasion of Ukraine. An issue that Marlene Amstad also raised. Since the obligation to announce cyber-attacks in May 2020, the authority has received “a hundred reports, about half of them about banks,” she said. More than half are acts aimed at availability via fairly basic denial of service attacks (DDOS), which flood the victim’s computer system with numerous requests, the regulator said in its annual report, which will be published at the same time.
Finma also claims to have organized three times more checks at banks in 2021 than in 2019 on these matters and even more this year. She adds that she found that “some institutions did not have a clear definition of the scope and content of their own critical and/or sensitive data. Consequently, these devices have encountered difficulties in setting up a targeted protection system.
Also read: Cyber attacks: stop being naive. Real
Finma conducted 650 investigations last year (compared to 628 in 2020) and 20 procedures forenforcement (33 in 2020) to enforce the rules of the financial markets. Corporate governance, risk management and money laundering were the main subjects of these proceedings.