The Swiss National Bank (SNB) announced on Thursday that it will provide funds secured against mortgages to all commercial banks, expanding liquidity provision to the sector. The move is aimed at enhancing financial stability and the resilience of the banking system in the face of potential risks, such as general uncertainty in the banking sector or cyber attacks on individual lenders.
SNB Vice Chairman explains the initiative
SNB Vice Chairman Martin Schlegel explained the initiative in a speech at the Swiss Banking Association’s annual conference. He said that the SNB will offer liquidity assistance to any bank that can transfer mortgages to the central bank as collateral. This option had previously only been available to systemically important banks, such as UBS and Credit Suisse.
“No matter their size, banks can find themselves in a situation where they need significant liquidity quickly,” Schlegel said, citing risks, such as general uncertainty in the banking sector or cyber attacks on individual lenders.
He added that the greater the number of banks that take the preparatory steps necessary to use the new possibility of obtaining liquidity, the greater will be the central bank’s room for manoeuvre in time of need.
SNB expects banks involved in mortgage lending to take part
The SNB said it expected banks involved in mortgage lending to take part in the initiative, which it sees as providing broad-based support to financial stability and the resilience of the banking system. The SNB also said it will continue to monitor developments in the mortgage and real estate markets closely and take appropriate measures if needed.
The SNB has been concerned about the high level of household debt and the overheating of some segments of the property market in Switzerland. In June, it maintained its negative interest rate of -0.75% and its willingness to intervene in the foreign exchange market if necessary to prevent an appreciation of the Swiss franc.
SNB’s initiative welcomed by banking sector
The SNB’s initiative was welcomed by the banking sector, which praised the central bank for its proactive and pragmatic approach. The Swiss Banking Association said that the initiative will strengthen the resilience of the Swiss financial centre and contribute to its competitiveness.
The Swiss Bankers Association also said that it supports the SNB’s efforts to ensure adequate liquidity provision for all banks and that it will work closely with its members and the SNB to implement the initiative.
