Fritz Zurbrügg: Introductory remarks, Swiss National Bank news conference

Introductory remarks by Mr Fritz Zurbrügg, Vice Chairman of the Governing Board of the Swiss National Bank, at the Media News Conference of the Swiss National Bank, Berne, 16 June 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

In my remarks today, I will present the key findings from the new Financial Stability Report, published this morning by the Swiss National Bank.

Economic environment

In the period between the publication of the last Financial Stability Report and the end of 2021, economic and financial conditions for the Swiss banking system remained favourable. GDP has returned to, or even exceeded, pre-crisis levels in most countries and unemployment rates have receded globally. Corporate ratings have improved and credit quality has remained high. However, these conditions have recently become more challenging, due to both the war in Ukraine and rising inflation around the world.

As my colleague Thomas Jordan has explained, the SNB's baseline scenario assumes that the impact of the war in Ukraine on domestic economic activity and inflation will be temporary and moderate. However, the economic outlook is subject to very high uncertainty regarding the development of financial and monetary conditions as well as economic activity.

This environment presents various risks for financial stability. First, the deviation between market prices for residential real estate and the price level that can be explained by fundamental factors, such as income and rents, has continued to increase in many countries, including Switzerland. Second, stock valuations in some markets remain high despite recent corrections. Third, sovereign and corporate debt levels rose significantly during the coronavirus pandemic. These vulnerabilities increase the sensitivity of the economy and of financial and real estate markets to adverse shocks.