The Swiss National Bank on Thursday warned the economic outlook is highly uncertain due to trade-related and geopolitical tensions, and said Swiss regulatory weaknesses should be addressed to further strengthen UBS’s resilience.
“Several risk factors could amplify the impact of potential negative shocks on global economic and financial conditions,” the SNB said in its 2025 Financial Stability Report.
The risks include public debt being near historical peaks globally, valuations in global residential real estate, global corporate bonds and the U.S. stock market still appearing stretched, the SNB said.
In Switzerland, profitability for the banking sector improved year-on-year in 2024, powered by UBS, the SNB noted.
Capital ratios remained broadly stable, available capital buffers reflected significant loss-absorbing and lending capacity, and banks held substantial liquidity buffers, which contributed to their resilience, the report said.
But regulatory weaknesses remain and should be addressed to strengthen the financial system, the SNB said, backing proposals made by the Swiss government, which earlier this month set out measures aimed at preventing future crises.
The loss potential for UBS, Switzerland’s sole remaining big bank, which acquired rival Credit Suisse in 2023, remained substantial under various stress scenarios, the SNB said.
In its key proposal, the government said this month that UBS’s participations in its foreign subsidiaries will have to be fully deducted from its Common Equity Tier 1 capital.
“From a financial stability perspective, this approach is the best solution,” the SNB said.
(Reporting by Ariane Luthi and Miranda Murray)
