Mortgage and real estate markets remain the biggest source of risk. I would like to make two observations in this connection. First, the imbalances on the mortgage and real estate markets persist. Both mortgage lending and prices for single-family homes and privately owned apartments have continued to rise at a moderate rate over recent months. And while prices for residential investment property have not increased any further, the risk of a price correction in this segment is particularly high. The renewed increase in vacancy rates indicates that the robust activity in rental apartment construction may have led to oversupply, exerting downward pressure on rental income and, in turn, on the prices of these properties. At the same time, initial yields on residential investment property, in other words the ratio of rental returns to transaction prices, are at historically low levels. In the event of an interest rate rise, initial yields on investment properties will also have to increase upon a change of ownership. This would place additional pressure on prices. Second, the risk appetite of domestically focused banks remains high. This is partly due to the fact that interest rate margins of these banks fell further in the first half of 2018. As long as this pressure on margins persists, incentives for domestically focused banks to increase risktaking will remain substantial.
Moreover, Credit Suisse and UBS have taken important organisational steps to improve their resolvability as part of their resolution planning. For instance, they have both set up Swiss  1  Final requirements refer to the requirements that will apply after expiry of all transitional provisions. In particular, they concern the qualitative requirements for going-concern capital. Page 1/3  Berne, 13 December 2018 Fritz Zurbrügg  News conference  subsidiaries that contain their systemically important functions, including, in particular, domestic deposit and lending business. To ensure an orderly resolution in a crisis, progress is still needed in three areas in particular. First, FINMA, as the competent authority, is currently in the process of drawing up resolution funding plans. These aim to ensure that a bank has sufficient liquidity to implement a resolution without recourse to state support. Second, it must be ensured that big banks’ lossabsorbing capacity is adequate, not only at group level, but also on a stand-alone basis at the level of the individual group entities. In this context, the Federal Council has announced that, during the first half of 2019, it will decide on the corresponding requirements for the highest operating unit of the big banks – i.e. the parent entity. Third, Credit Suisse and UBS must further reduce the financial and operational dependencies within the group. Domestically focused banks  I would now like to turn to the domestically focused banks. Here too, there has been little change since the Financial Stability Report was published in June.