Mortgage market in supervision 2019

FINMA has repeatedly emphasised the growth of mortgage market risks in recent years. The reporting year was no different as FINMA drew attention to the ongoing growth of these risks, for example at the annual media conference of 4 April 2019, where the results of the 2018 extended mortgage stress test covering 18 banks were disclosed, and in its December Risk Monitor. The latter report highlighted investment properties, which merit a closer supervisory focus as they are particularly exposed, not least due to unprecedented vacancy levels.

Shrinking interest margins and the simultaneous expansion of mortgage loan volumes as lenders’ risk tolerance rises remained unchanged in 2019. As a result, FINMA continues to closely monitor the mortgage market. In 2019, it advocated stricter loan criteria for investment properties. The amendment of the sector’s self-regulation during the reporting year is a step in the right direction. However, as buy-to-let financing is not explicitly covered by these tightening measures, FINMA will continue to take a special interest in developments in that area. Besides business and risk development in mortgage business, the results of the on-site reviews conducted in 2018 and the stress tests were the main subjects of the supervisory dialogue with the implicated banks. Where appropriate, FINMA prescribed supervisory measures and imposed additional capital requirements.

FINMA conducted more on-site activities in the year under review, including five supervisory reviews lasting several days and four shorter deep dives into mortgage businesses. It also conducted mortgage stress tests involving five further banks. As a result, the peer group for all the participating banks increased to 23 and the scope of the FINMA stress test increased to over 70% of the Swiss mortgage market.

(From the Annual Report 2019)