Swiss government holds off on mortgage lending rules for banks

Banque Cantonale de Geneve

02/07/2014 17:40

By Joshua Franklin and Katharina Bart 
    ZURICH, July 2 (Reuters) - Switzerland has opted not to 
impose new measures on lenders to cool demand in the overheated 
domestic housing market, saying curbs proposed by banks 
themselves are sufficient for now. 
    Swiss lenders and financial regulators have been at odds on 
how best to guard against the risk posed by historic highs in 
house prices and mortgage debt, driven in part by ultra-low 
interest rates. 
    The Swiss central bank has pared rates to lessen the appeal 
of the safe-haven Swiss franc and stave off a recession. 
    The government on Wednesday welcomed stiffer standards for 
mortgage loans proposed by the banking industry last week, 
saying those measures could help rein in the risks linked to 
rising house prices.  
    "For the time being, the Federal Council (Swiss government) 
... does not envisage taking further measures," the government 
said in a statement. 
    The move represents a win for Switzerland's banking 
association, which has avoided further government measures after 
twice being ordered to hold extra capital against risk-weighted 
assets in mortgage portfolios.  ID:nL5N0KX0DQ  
    The lobby last week promised banks will cut the required 
time by which one-third of any mortgage must be repaid to 15 
years from 20. Banks will also apply a more conservative measure 
of price when financing property loans.  ID:nL6N0P52B0  
 ID:nL5N0OS5AK  
    Swiss cooperative bank Raiffeisen, cantonal banks such as 
Zuercher Kantonalbank  ZKB.UL  and Banque Cantonale de Geneve 
 BCGE.S , and other regional lenders provide the bulk of Swiss 
mortgage lending. 
    FINMA, Switzerland's financial regulator, described the 
measures which are due to come into force on Sept. 1 as a step 
in the right direction. 
    The government said it would decide by year-end whether more 
demand-side measures are necessary and echoed comments from the 
Swiss National Bank last month on higher capital requirements 
for lending banks.  ID:nL6N0P01MU  
    A spokeswoman for the Swiss Bankers Association said the 
lobby group welcomed the support of the new rules.  
    Last week, Britain became the biggest economy to date to 
impose mortgage lending curbs, when the Bank of England imposed 
its first limits on how much most people can borrow to buy a 
home.  ID:nL6N0P72HO  
 
 (Editing by David Holmes) 
 ((joshua.franklin@thomsonreuters.com)(+41583067007)(Reuters 
Messaging: joshua.franklin.thomsonreuters.com@reuters.net)) 
 
Keywords: SWITZERLAND MORTGAGES/