We are, above all, interested in the question of whether banks are sufficiently capitalised in view of the aforementioned vulnerabilities, and are able to maintain their economically important functions such as lending despite incurring losses. Our stress tests confirm the relevance of the aforementioned vulnerabilities. They show that banks would suffer substantial losses in the event of an abrupt and steep interest rate rise combined with declining real estate prices. Affordability risks would materialise, meaning that numerous borrowers would no longer be able to pay their mortgage interest. Furthermore, many mortgages would be insufficiently covered, i.e. the mortgages concerned would no longer be fully secured by the value of the properties. In such a scenario, the capital ratios of numerous banks would drop below their target values and, in some cases, even below the regulatory minimum requirements. Equally, our stress tests underscore the importance of the capital buffers currently held by banks, which comprise voluntarily held buffers besides the capital required by statutory regulations. With these capital buffers, our assessments suggest that most banks would be capable of absorbing potential credit losses. In other words, we consider the resilience of most banks to be adequate. Current situation requires vigilance  Ladies and gentlemen, the fact that we consider banks’ capitalisation to be sufficient at present does not mean that we can relax with regard to the vulnerabilities on the mortgage and real estate markets. That the current situation is not more precarious is due not least to the measures taken in recent years (cf. slide 5).
To this end, it uses a variety of models and empirical approaches, and also conducts its own surveys. In addition, the SNB analyses economic indicators for Switzerland and abroad, and follows the assessments and forecasts of other institutions. KOF Swiss Economic Institute at the Swiss Federal Institute for Technology Zurich (ETH) is without doubt the best-known for economic analysis. It makes a significant contribution towards understanding the Swiss economy with its regular data surveys (for example, the survey of companies it has been systematically conducting since 1955), as well as its economic forecasts and special analyses. In doing so, KOF fulfils an important role for the SNB's monetary policy and, ultimately, for the greater good of our country. For this reason, the SNB has been connected with the KOF Swiss Economic Institute since its beginning in the 1930s. Both institutions maintain a stimulating exchange of information and ideas to this day. With high-quality economic analysis closely linked to scientific research, KOF Swiss Economic Institute will continue to make a valuable contribution in future - to ensure an even better understanding of the Swiss economy. BIS central bankers’ speeches  1