News conference  Zurich, 17 December 2020 Fritz Zurbrügg  Introductory remarks by Fritz Zurbrügg In my remarks today, I will begin with the developments in the Swiss banking sector environment. I will then provide an assessment of the current situation at the two globally active big banks, Credit Suisse and UBS, as well as at the domestically focused banks. Finally, I will talk about the impact the coronavirus pandemic is having on the use of cash. Banking sector environment  Economic conditions for the Swiss banking sector continue to be difficult. As already mentioned by my colleague Thomas Jordan, while global GDP has recovered somewhat since the downturn in the second quarter, in most countries economic activity remains well below its year-back level. As a result, credit risks in particular have increased worldwide, with ratings of corporate bonds deteriorating significantly over the course of the year. In comparison with the real economy, the situation on the global financial markets has eased considerably more since the spring. Risk premia on corporate bonds rose markedly after the outbreak of the pandemic, but have since largely declined again. Stock prices have also recovered from their downturn in February and March. The steep recession has thus far had very little impact on the Swiss credit and real estate markets. Lending volume in the mortgage market and prices in the residential real estate market continued to rise in the second and third quarters of 2020. Furthermore, the number of bankruptcies and value adjustments on existing loans has remained low.
Improved confidence has also benefited from the changes in certain external conditioning factors, such as those linked to the ECB’s monetary policy and to the progress in economic and monetary union, which have prompted an easing in financing conditions. On top of these are other more transitory effects, such as those linked to the low level of oil prices or to the depreciation of the euro. I shall continue with the analysis contained in the Annual Report, briefly reviewing the key factors behind the recovery. Budgetary consolidation Firstly, regarding public finances, the general government deficit met the objective set by the European Council (5.8% of GDP) for the third year running. In 2014, fiscal policy had a less restrictive impact than in the preceding years and was a less prominent conditioning factor of macroeconomic developments. The reduction in the deficit in 2014 came about as a result of the greater adjustment made at the central and local government levels, since most of the regional governments exceeded the targets set. The budgetary improvement was also the consequence of a similar-sized contribution by revenue and public spending (once the impact of the financial assistance to the banking system is stripped out of spending). The tax take progressively picked up during the year, in step with the cyclical improvement and the change in the composition of GDP.