How we fulfil our tasks Ladies and gentlemen, in light of the high loss potential of mortgage and real estate market crises, the question is: How can systemic risks originating in these markets be contained? From a macroprudential perspective, three elements stand out: identifying the risks at an early stage, containing their growth, and strengthening banks’ resilience. I would like to explain these three elements in greater detail. Let me begin with the SNB’s risk monitoring, before speaking about the macroprudential instruments we have at our disposal. 5  Cf. the SNB focus article Household wealth in Switzerland: concepts and trends in an international comparison, available online on the SNB’s data portal: data.snb.ch/en/topics/texts#!/doc/focus_20210429 (consulted on 30 August 2021). Page 4/12  Risk monitoring  In identifying risks at an early stage, we are interested in vulnerabilities on the mortgage and real estate markets and in their possible consequences for the banking sector. Vulnerabilities manifest themselves primarily in inflated real estate prices and unsustainable mortgage lending. Both entail a heightened susceptibility to corrections in the form of sudden drops in prices and sharp rises in loan defaults. Our assessment of these risks is based on a broad range of data and methods. The fact that such a broad range is required reflects the high level of uncertainty involved in measuring these risks, as well as the different strengths and weaknesses of the individual indicators used. The more indicators there are pointing to a certain development, the clearer the assessment becomes.
At the forefront are the regulatory requirements on banks’ equity capital and liquidity through laws and ordinances by the federal government and FINMA. Moreover, in Switzerland, the self-regulation rules for banks also constitute an important element. Thus, the relevant legal requirements are supplemented by rules and guidelines set by the Swiss Bankers Association, which FINMA can also recognise as a minimum standard. 8 This instrument has been applied several times over the past few years in relation to the mortgage and real estate markets. 8  Cf. finma.ch/en/documentation/self-regulation/ (consulted on 30 August 2021). Page 6/12  At international level, the SNB participates in various committees and working groups, such as the Basel Committee on Banking Supervision. The recommendations and agreements of these bodies in turn have a major influence on our national legislation. One example of this is the CCyB. It was devised at international level and introduced in Switzerland in 2012 by means of a Federal Council ordinance. The CCyB is a key instrument for counteracting imbalances on the mortgage and real estate markets. When activated, banks are obliged to temporarily increase their equity capital beyond the levels imposed by existing capital requirements, depending on the magnitude of the vulnerabilities. The CCyB is designed to strengthen the resilience of the banking sector against the risks of excessive credit growth and also to counter any unsustainable credit growth. The capital buffer in Switzerland has so far been targeted at mortgage loans granted for residential real estate.