ZURICH, June 24 Swiss banks will tighten
requirements for mortgage loans after repeated warnings from
Switzerland's central bank and the International Monetary Fund
of a looming housing bubble.
Switzerland's lenders and financial regulators have been at
odds on how best to safeguard against the risk posed by historic
highs in house prices and mortgage debt, driven in part by
ultra-low interest rates.
The Swiss central bank has pared back rates to lessen the
appeal of the safe-haven franc and stave off a recession.
On Tuesday, Switzerland's banking association said it cut
the required time by which one-third of any mortgage must be
repaid to 15 years, from 20 currently. Banks will also apply a
more conservative measure of price when financing property
"These measures will contribute to a calming and
stabilisation of potential hotspots in the real estate market,"
the Swiss Bankers Association said in a statement.
The move represents a preemptive strike against measures
being readied by the government, which fears the high debt
levels could provoke a crash if the economy went into recession.
The lobby said it would submit the measures to FINMA,
Switzerland's banking regulator, for endorsement.
The Swiss National Bank, hamstrung by rising housing prices
because it cannot lift interest rates due to a cap it has set on
the Swiss franc, warned banks about their lending methods as
recently as last week at its quarterly rate-setting session.
The SNB said it had seen a slight slowdown in the pace of
mortgage lending growth, but stopped short of giving the
all-clear on the housing market.
Swiss cooperative bank Raiffeisen, cantonal banks such as
Zuercher Kantonalbank and Banque Cantonale de Geneve
and other regional lenders provide the bulk of Swiss mortgage
Overheating housing prices have led Swiss officials to
impose an extra capital layer on banks to rein in home equity
(Reporting By Katharina Bart: editing by John Stonestreet)