Switzerland's financial watchdog lists significant risks for the financial industry and adds measures to tackle climate risk in the sector.
Switzerland's market for buy-to-let properties shows indications of overheating, according to Finma's risk monitor report for 2021, released on Thursday. Risk in the regulator's other focus areas remains the same as last year.
The Bern-based regulator sees the following risk areas for financial markets:
- persistently low interest rates
- property and mortgage bubble
- foreign loan and bond defaults
- cyberattacks
- money laundering
- lack of cross-border market access
Overheating
Government support packages and monetary policy interventions all helped the real estate market stay resilient in the face of the coronavirus pandemic. However, there are indications of the investment property sub-market overheating, the report says.
Finma pointed to increasing mortgage volumes in the last year. Prices for owner-occupied houses have accelerated further and property prices have increasingly decoupled from the development of income and consumer prices.
«The development of the market and credit portfolios for investment properties remain a specific point of focus,» Finma’s head of banking supervision, Jan Bloechliger, said.
Climate Risk
Finma sees climate risks for the financial sector as a longer-term trend. The supervisor will put an emphasis on analyzing the first climate risk-related disclosures based on the requirements specified in Finma circulars.
It is also working with institutions to adequately capture financial risks associated with climate change and to incorporate them into the institutions’ risk management systems. Greenwashing in the distribution of financial products and services as a risk to investor, is also in focus.
