IMF Backs Swiss Bank Reform Push Amid UBS Capital Standoff
The changes would reduce the risks for the state, taxpayers and the economy, the IMF said on Tuesday in an assessment of the country's sector which it conducts every five years.
'Timely implementation of these bold reforms would further strengthen the long-term stability of the Swiss financial center,' the IMF said.
The sweeping reforms, which envision capital requirements for UBS rising by as much as $26 billion, as well as bigger powers for the regulator Finma, were announced by the government last month and are set to be debated in parliament in 2027. UBS has called the approach 'extreme' and vowed to push to dilute the bill.
The IMF also said that Finma should get 'a full suite of early intervention powers,' which are immediately enforceable, including the ability to rein in banks for deficiencies in governance and risk management. Overall, more supervisory resources are needed, it added.
Shortly after the 2023 demise of Credit Suisse, the Washington-based organization had said that the crises warranted a review of Switzerland's framework for systemic lenders. It also said that further instruments and resources are necessary to safeguard financial stability. The emergency takeover of its former rival by UBS has left Switzerland with a bank whose balance sheet is twice the size of the national economy.
Aside from regulation, overpriced real estate and loosening mortgage standards have contributed to systemic risks in Switzerland's banking industry staying high, the IMF said.
In its economic forecasts, the IMF said that the Swiss economy will — adjusted for large sports events — grow 1.2% in 2026 and 1.3% this year. That's up from 1% in 2024 and in line with the government forecast.
The fund forecasts consumer-price growth of 0.1% this year and 0.6% next. That's similar to the central bank's view. Core inflation is expected to stay above zero and within the Swiss National Bank's 0-2% price stability range this year, according to the IMF.
The assessment comes less than two weeks after the SNB lowered borrowing costs to zero amid sluggish inflation and a strong franc. It also introduced negative rates for lenders who park too much money with the institution.
Taking into account also signs of weakening in the labor market and uncertainty from abroad, the rate cut was appropriate, the IMF said. 'Temporarily negative headline inflation should not warrant further easing,' it added.
In May, consumer-price growth was at -0.1% and is expected to have stayed below zero in June. Data are due on Thursday.
The IMF also said that while currency interventions 'may be needed' to offset haven flows into the franc, they should be carefully weighed given the already outsized balance sheet of the SNB. The central bank should also refrain from raising distributions.
A review of the SNB's monetary and communication framework 'could be useful,' the IMF said, raising the possibility of bringing in external consultants. The central bank should consider giving more information, including providing scenarios that clarify how it would react to different developments.
More stories like this are available on bloomberg.com
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