(Adds detail, CEO and professor comment)
ZURICH Aug 13 The Swiss National Bank is adding
cooperative lender Raiffeisen to a list of banks that come under
closer supervision because of their importance to the wider
financial system, the SNB said on Wednesday.
Nearly six years after the financial crisis, regulators in
Switzerland are singling out banks - which account for roughly 6
percent of the country's economy - as firms whose stability is
essential for the well-being of Switzerland's financial system.
Those banks, which include Swiss giants UBS and
Credit Suisse as well as Zuercher Kantonalbank (ZKB),
are required by the Swiss central bank to meet tougher
regulatory requirements as a result. The stiffer rules include
maintaining a bigger capital cushion and establishing an
emergency plan to protect themselves against market shocks.
Raiffeisen has a dense network of 305 independently run
branches in a national cooperative and a balance sheet of 183
billion Swiss francs (201.39 billion US dollar), but it is
probably the cooperative bank's mortgage book which is of most
concern to the Swiss central bank.
"Raiffeisen's strong market position in domestic deposits
and loans was decisive in its decision," Raiffeisen said in a
The bank will now consult with Swiss bank regulator FINMA
about the next steps, including establishing fresh capital
FINMA published provisional rules in May that would require
UBS to hold total capital worth 19.2 percent of its
risk-weighted assets by 2019. Credit Suisse would have to meet a
16.7 percent ratio.
As of June, Raiffeisen had reached a 15 percent ratio, just
above the current FINMA target of 14.8 percent. The bank is
targeting a ratio of around 15.6 percent by 2016.
Raiffeisen Chief Executive Pierin Vincenz said the bank
could generate additional capital through retained profits or by
tapping the debt market.
"The capital market is also available to us to raise
capital," Vincenz told reports on a media call. "I do not expect
that this will impair our basic strategy."
Raiffeisen is a major player in Switzerland's nearly 870
billion-franc mortgage market, holding a 16.5 percent stake
worth 143.3 billion francs in 2013, according to SNB statistics.
ZKB's 2013 figures, by comparison, show it held just under 70
billion francs worth or mortgages.
Ratings agency Moody's last year downgraded Raiffeisen's
long-term debt rating, warning that its rising share of mortgage
lending makes the cooperative bank susceptible to shocks if
Switzerland's housing market falters.
Mortgage lenders, the government and the central bank have
come up with a variety of measures to combat rising property
prices fuelled by ultra-low interest rates, immigration and
Switzerland's appeal as a safe haven for financial investors.
Those include temporarily demanding more capital against
mortgage lending plans, to no longer allow pension funds as down
payments for property and stiffer standards for mortgage loans.
At its June meeting, the SNB said there was no evidence of
any sustainable easing in the mortgage and real estate markets
although the pace of mortgage lending growth had slowed
A quarterly study by UBS last week suggested steps to cool
off Switzerland's housing market are taking effect.
Overheated housing markets are also a worry in Britain and
in Germany. The Bank of England in June imposed its first limits
on how much most people can borrow to buy a home. Germany's
finance minister has warned low interest rates were already
spawning "dangerous" rises in domestic property prices.
Professor Arturo Bris at IMD business school said the
actions taken by Switzerland's central bank - which include
raising the level of capital banks must hold against their
mortgage book to 2 percent - were the proper course of action.
"The SNB is in my opinion one of the very few that have
taken a tough stance on mortgage lending and bank credit," Bris
said. "The use of the counter-cyclical capital buffer in
Switzerland ... guarantees that the central bank is vigilant
regarding the real estate market and excess lending."
(1 US dollar = 0.9087 Swiss franc)
(Reporting by Alice Baghdjian, Katharina Bart and Joshua
Franklin; Editing by Shri Navaratnam)