“Switzerland’s central bank has a message for lenders: act now to stem surging credit growth or face further restrictions.
The government, at the urging of the Swiss National Bank, yesterday ordered banks to hold additional capital as a buffer against risks posed by the country’s biggest property boom in two decades. The amount, set at 1 percent of banks’ risk- weighted assets tied to domestic residential mortgages, can be increased to as high as 2.5 percent.
“The measure is a warning shot at banks that were overgenerous with their credit lending,” said Janwillem Acket, chief economist at Julius Baer Group Ltd. in Zurich. “The government and the SNB want to tell banks to be more restrictive or we’ll tighten the reins further.”
Governments from Singapore to Dubai are seeking measures to cool overheated property markets after central bankers lowered interest rates to stimulate their economies. While Swiss policy makers in July toughened rules on mortgage lending to avoid a repeat of a housing collapse that crippled the economy in the early 1990s, the SNB requested the buffer after “imbalances intensified further” in the second half.
The measure will be imposed on all Swiss banks as well as subsidiaries of foreign banks operating in the country. Lenders will have to add about 3 billion francs ($3.27 billion) to comply with the new rules, which will be enforced starting Sept. 30, according to the government. Policy makers will “continue to closely monitor developments” and “regularly reassess the need to adjust the level,” the SNB said.
