Despite the fact that this progress has been achieved, the SNB considers that the big banks’ loss-absorbing capital is still below the level needed to ensure sufficient resilience. This assessment is based on three factors: First, in the event of a further escalation of the euro  BIS central bankers’ speeches  1  area crisis, the loss potential for the big banks would be substantial compared to their lossabsorbing capital. As I have just pointed out, the big banks have only moderate direct exposure to the most vulnerable peripheral euro area countries, yet if the crisis in these countries were to deepen, a general deterioration in economic and financial conditions could be expected. In such a case, the potential losses for the banks would extend to a significant portion of their credit and trading positions. Second, the SNB’s assessment is based on a comparison with capitalisation levels at other international big banks. This comparison uses the definitions of the Basel III framework once fully implemented. These definitions yield the most accurate picture of a bank’s true resilience. The comparison based on these definitions reveals that both Swiss big banks – and in particular Credit Suisse – are below the international average. Given the importance of the big banks for the Swiss economy and for financial stability, an above-average capitalisation level would be appropriate. Third, the leverage of both big banks remains very high, despite a reduction in risk-weighted assets.
In Spain’s case, in a setting in which the state of alert affected the last two weeks of Q1, we witnessed the biggest-ever contraction in GDP historically in a single quarter, namely a quarter-on-quarter rate of 5.2%. This decline was one of the most pronounced in the euro area, and was in response to several circumstances. These included a relatively greater severity of the lockdown measures (given, too, the greater intensity of the pandemic) and the presence of certain structural factors in our economy that make it more vulnerable to a shock of these characteristics. The most significant factor here is perhaps the high weight of the tourism-related sectors, which have been particularly affected by the social distancing measures. The reduction in hours worked, estimated at 5% in Q1, was also the biggestever in the time series and highlights the marked impact of the various measures affecting movement on the labour market in the early stages of this crisis. Admittedly, the restrictions on movement were gradually eased as from early May. But the state of alert ran for much of Q2, whereby a notable increase in the decline in GDP and in employment in this period is to be expected. The latest Banco de España macroeconomic projections, published in June against a background of unusually high uncertainty, posted estimates of quarter-on-quarter declines in activity in a range between -16% and -21.8%. And the information since available tends to confirm that the decline in economic activity in Q2 as a whole will have been in this range.