The economic conditions prevailing this year due to the spread of the Covid-19 virus are significantly worse than last year. Swiss banks have to prove their worth under these conditions, and they have done well in general, according to Thomas Jordan, the head of the Swiss National Bank (SNB).

In a speech held at the Lugano Banking Day, Jordan praised the worth of adequate capital and liquidity buffers. He stressed that the global banks had significantly strengthened their capital bases, reduced their risk positions and implemented key organizational measures for crisis management. The resilience of domestically focused banks was also good overall, he added.

Key Issues in the Focus of Regulation

By focusing on the key aspects of capital, liquidity and resolution, regulations in Switzerland are typically lean, said Jordan: «This is because we believe it is important that market players in this country should be subject to as few constraints as possible regarding their activities and their business model.»

Apart from the lean regulation, the governor of the SNB also gave mention to the importance of monetary conditions and the strength of the Swiss franc. He sees the currency as a pillar of a stable and attractive financial center – with a stable currency helping to maintain the value of assets and investments.

And yet, the strong franc has also been problematic in some ways, not least because wealth manager earn their profits in foreign currency while incurring their costs in francs. Jordan also mentioned the negative interest rate, which was a challenge for banking, even if of course Switzerland isn't along with the situation.

Against Stricter Rules

The central bank in Switzerland has in recent quarters come under sustained pressure to make adjustments to the investment policy. Political groups are calling on the bank to reflect the need to stop global warming in its policy. The most recent proposal aims to exclude firms from the portfolio of the central bank that produces military goods. The SNB opposes the various demands because it fends for its independence.

Jordan didn't mention the moves in his speech, but stressed the importance of stable political conditions for the financial market: «We must try to avoid creating any administrative hurdles that neither contribute to stability nor bring any great benefit, but instead unnecessarily restrict the activities of financial service providers.»

Open Market Access

The head of the central bank also touched upon the issue of open markets. He said that access to markets had worsened in some jurisdictions following the financial crisis, which hampered wealth managers in particular.

Until now, the liberalization of global trade had focused on goods, he added. Liberalization of trade in services could offer new growth potential for financial service providers.