Switzerland’s financial authority examines the impact of the conflict on banks but sees no threat to financial market stability.
Switzerland's Financial Market Supervisory Authority (Finma) does not see a widespread threat to the country's financial markets from the war in Ukraine although the conflict does pose «accentuated risks» for individual institutions, it indicated in a report released during its annual media conference.
Finma CEO Urban Angehrn summarized the findings from the report, saying it was keeping a «watchful eye» on the risks.
«This conflict poses numerous risks for the Swiss financial sector, and accentuated risks for individual institutions. We currently take the view that the conflict does not constitute a wide-scale threat to the Swiss financial market,» Angehrn said.
Possibility of Contagion
He indicated that Finma is taking a close look at identifying concentration risks and the possibility of contagion resulting from the conflict by evaluating to what degree institutions and the services they provide are exposed to it.
As part of that, the regulator looked at potential liquidity and capital resource issues, as well as how banks managed the enhanced international sanctions regime against Russia and any related operational risks.
«These include outstanding loans to Russian debtors or direct investments in Russian securities. The Lombard loan or derivatives business with either Russian underlying value or with potentially sanctioned Russian counterparties can also be problematic. There is a danger here of banks not being able to withdraw from these transactions and also not being able to change margins,» Angehrn said.
Rising Sanctions Queries
Finma has received many questions related to sanctions, particularly related to their enforcement and interpretation.
«Dealing with them is by no means new for the institutions, but the scale and complexity have increased sharply,» he indicated.
He also said the Swiss financial institutions needed to remain vigilant against the threat of cyber-attack as a result of the war although there were currently no signs of any widespread or systemic attempts on the finance hub's technical infrastructure.
