Swiss Banks May Win Capital Relief on Virus, Joining Peers

(Bloomberg) --

Swiss banks may become the latest to win significant capital relief as regulators consider cutting the long-standing surcharge on residential mortgages to limit the damage of the coronavirus pandemic.

The Swiss National Bank said Thursday it’s “examining whether a relaxation of the countercyclical capital buffer would be possible despite the risks on the mortgage and real estate markets.” While banks in the country are “equipped for difficult situations,” lowering the requirement would increase their room for manoeuvre, it said in a statement.

The countercyclical buffer is meant to address systemic issues in a nation’s financial system and is designed to be released in times of stress. Switzerland raised the requirement to 2% on residential mortgage exposures in 2014 to address the biggest property boom in decades.

When the measure was introduced, it was seen as affecting mostly Raiffeisen Schweiz as well as regional lenders, with less of an impact on UBS Group AG and Credit Suisse Group AG. Regulators in France and Germany on Wednesday both moved to cut their countercyclical buffers to zero, freeing up a combined 13 billion euros ($14.1 billion) in capital to support lending.

The SNB also reduced the burden of negative rates on banks by increasing the exemption threshold factor to 30 from 25 as of April 1. That could save banks 600 million Swiss francs ($615 million) annually, according to SNB President Thomas Jordan.

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