The Swiss National Bank warned on Thursday that the global economic outlook remains uncertain due to trade disputes and geopolitical risks.
In its 2025 Financial Stability Report, the central bank also said regulatory weaknesses in Switzerland should be fixed to strengthen UBS and the broader financial system.
The report highlighted several global risk factors that could worsen the impact of future shocks, including high public debt levels, elevated prices in housing and corporate bond markets, and stretched valuations in the U.S. stock market.
In Switzerland, bank profitability improved in 2024, driven mainly by UBS. Capital ratios remained stable, banks maintained strong liquidity buffers, and capital levels supported their ability to absorb losses and continue lending.
The SNB, which cut interest rates to zero on Thursday, said that while banks remain resilient, the regulatory system still has gaps. It supported the Swiss government’s recent proposals aimed at avoiding future financial crises.
UBS remains a key focus after acquiring Credit Suisse in 2023. The SNB said the potential for losses at UBS under stress conditions is still significant.
One of the government’s proposals is that UBS should deduct investments in its foreign subsidiaries from its Common Equity Tier 1 capital. The SNB said this would be the best step from a financial stability perspective.
The report also warned that some banks could face liquidity shortfalls in foreign currencies. The SNB said these banks must maintain strong foreign currency liquidity buffers and ensure sound risk management practices.
In May, the European Central Bank asked some European lenders to review their ability to access U.S. dollars during times of financial stress due to concerns about possible mismatches in their balance sheets.
