Swiss central bank calls for action amid global uncertainty
The Swiss National Bank (SNB) warned Thursday that the global economic outlook remains highly uncertain due to escalating trade tensions and geopolitical instability. In its 2025 Financial Stability Report, the SNB also pointed to domestic regulatory weaknesses, urging reforms to strengthen the financial system and bolster UBS’s resilience.
The central bank highlighted elevated global debt levels, overvalued residential real estate, and stretched U.S. equity markets as key vulnerabilities. “Several risk factors could amplify the impact of potential negative shocks on global economic and financial conditions,” the SNB said.
UBS dominance poses systemic risk
While Swiss bank profitability improved in 2024—largely driven by UBS—the SNB cautioned that the country’s financial stability is overly reliant on a single dominant institution. UBS became Switzerland’s sole global systemically important bank after acquiring Credit Suisse in 2023.
Stress tests show UBS still carries significant loss potential, the SNB noted. To reduce systemic risk, it endorsed government proposals requiring UBS to fully deduct its foreign participations from its core capital.
Liquidity concerns for foreign currencies
Though capital ratios and liquidity buffers remain robust overall, the SNB expressed concern that some banks may face liquidity shortfalls in foreign currencies. It stressed the importance of maintaining strong foreign currency reserves and sound risk management practices.
The report comes as the SNB also cut interest rates to zero, citing subdued inflation and a need to support economic growth. The bank’s dovish stance reflects growing anxiety about global market fragility and domestic financial sector concentration.
Push for stronger regulation gains momentum
The SNB’s recommendations echo recent government initiatives to tighten oversight following the Credit Suisse collapse. Regulatory proposals include new capital rules for UBS and broader systemic safeguards to avoid future crises.
“From a financial stability perspective, this approach is the best solution,” the SNB said, backing stricter capital deductions for UBS’s international holdings.