Switzerland’s banks will suffer losses from dud corona loans, but the country’s head financial regulator is sanguine about the overall situation.
«Of course we’ll see credit defaults here and there,» Finma head Mark Branson told «Handelszeitung» in an interview on Thursday (behind paywall, in German). The chief Swiss overseer was referring to emergency measures in March which freed up 26 billion Swiss francs ($28 billion) in capital at banks as part of a lending bonanza.
Liquidity in March and April worsened with «dramatic speed» as investors sought cash and quickly tapped out their credit facilities. Considerable capital cushions built as a result of the 2008/09 crisis can absorb hefty losses, he noted. «Certainly there are horror scenarios where even these cushions are strained, but the general situation was and remains good.»
Real Estate Bubble?
The regulator and Switzerland’s central bank lifted capital buffers for home equity lending and also temporarily stopped charging for Swiss franc deposits. Three months after the loan program launched, banks have granted 13.4 billion francs in credit to small- and mid-sized businesses, according to Swiss government data.
Credit Suisse and UBS also got a special breather on risk-taking. Branson signaled the raft of measures was to avert a credit freeze: banks not having ample funds to lend in crisis.
Branson said risks in the property market remain major, though the threat of further overheating, or mortgage-based buying accelerating as fast as in recent years, is banished. Finma views the biggest real estate market risks in yield-bearing property, Branson said. «The market will probably cool, but we don’t know precisely yet.»
