As you know, Spanish credit institutions have based a substantial portion of their business in the recent upturn on the granting of loans for housing development and purchases. And a large number of these loans have ultimately been repackaged as negotiable financial instruments by means of securitisation. These two phenomena are, as you all know, at the root of the problems experienced by certain credit institutions in other regions. But before drawing any insufficiently founded conclusions from this, we must bear in mind the differences between Spanish institutions and those beyond our borders that have been more severely impacted by the effects of the turbulence. As I shall explain, these differences are substantial and place Spanish financial institutions in a sound position to withstand these effects. The first and certainly one of the most significant differences lies in the fact that Spanish banks have kept the risks of the loans they have securitised on their balance sheets. The "originate-to-distribute" model followed elsewhere has not been developed at all in Spain and, consequently, credit institutions' incentives to value loan risks in a cautious and rigorous manner have not been weakened. Under these conditions, it is perfectly understandable why products like the US subprime mortgages, which triggered the current situation, have not emerged.
For the Swiss mortgage market, there is currently only a small risk of a credit crunch. On the one hand, there have been no widespread excesses on the Swiss property and mortgage markets recently, which makes it unlikely that banks’ appetite for risk will decline to any great degree. On the other hand, opportunities for loan refinancing in Switzerland remain strong. The structure of mortgage lending in Switzerland is quite varied, and for banks the “Pfandbrief” mortgage bond is a refinancing tool that provides continuing strong opportunities for loan refinancing, and has experienced something of a renaissance since the financial crisis. As such, the already muted outlook for the Swiss economy is unlikely to suffer any additional impact from a credit crunch on the property market. BIS Review 107/2008  1