IMF attests that Switzerland has good growth prospects and a stable financial sector

Bern, 24.03.2014 - The International Monetary Fund (IMF) expects growth of approximately 2% for Switzerland this year thanks to the improved outlook in the export sector. It recommends that the SNB should maintain the exchange rate floor of CHF 1.20 per euro. In addition to the regular IMF country review, the financial sector was examined in detail. The IMF recommends that the big banks should continue to reduce leverage. It also advises pursuing the efforts undertaken to ensure the cross-border resolvability of large institutions.

The IMF believes that monetary conditions have improved over the past 12 months. Nevertheless, renewed appreciation of the Swiss franc could quickly bring back deflationary pressures. Against this background, the IMF continues to support the Swiss National Bank's exchange rate floor of CHF 1.20 per euro. In case of renewed appreciation pressures, the IMF believes that the SNB could introduce negative interest rates on commercial banks' reserves. In view of the SNB's balance sheet risks, further efforts to increase the bank's capital would be advisable according to the IMF.

According to the IMF, the recent approval of the popular initiative "against mass immigration" has increased uncertainty about the medium-term growth prospects. Moreover, the acceptance of the initiative emphasises the challenges of an aging population. In this regard, the IMF welcomes the current retirement provision reform, particularly the proposed alignment of the retirement age of women to that of men and the introduction of a debt brake for social security funds.

The IMF continues to see risks in the mortgage market and real estate sector. It welcomes the Federal Council's decision to increase the countercyclical capital buffer in January. The measures introduced in the area of self-regulation should also be tightened. The IMF reckons that stronger demand-side measures may eventually prove necessary.

Within the scope of an in-depth assessment of the financial sector, stress tests showed that the banking sector's stability has increased considerably since the global financial crisis of 2008/09. At the same time, the IMF pointed to the importance of further reforms. For example, the leverage ratios of the largest banks should be lowered further. In addition, cooperation with international authorities should be pursued in order to achieve measures to make the largest banks resolvable without public sector support. The IMF further recommends increasing FINMA's number of employees, in particular so that it can ensure more intensive supervision of smaller and medium-sized banks. Finally, the IMF suggests bringing the deposit insurance scheme more into line with international best practices.

The IMF delegation conducted the annual country evaluation in Bern and Zurich from 14 to 24 March 2014. The regular evaluation of the economic and financial situation of its member states in the context of the so-called Article IV Consultation is a core element of the IMF's economic policy monitoring activity.

The examination of the financial sector within the scope of the so-called Financial Sector Assessment Program took place between June and December 2013. This assessment, which is mandatory for IMF members with an important financial centre, is conducted approximately once every five years. It determines how stable the financial sector is and assesses compliance with the international standards for the supervision of banks, insurance companies and the financial market.

The relevant IMF reports will be published following discussion by the Executive Board at the end of April.

Address for enquiries

Anne Césard, SIF Communications
+41 31 322 62 91, anne.cesard@sif.admin.ch