As Finma wrote, a long phase with negative key interest rates also ended in Switzerland in September 2022. In the face of high inflationary pressure, central banks adjusted the course of monetary policy and in some cases increased interest rates significantly. However, uncertain developments in inflation, interest rates and economic growth will harbor risks.
Specifically, the supervisor sees seven main risks to the financial sector. These are: interest rate risks, mortgage credit risks, credit risks related to other loans, cyber-attack risks, risks in combating money laundering, risks arising from more difficult cross-border market access and increase in risk premiums (credit margins).
While FINMA rates the risks associated with cyberattacks as consistently high, it identifies increased risks over the previous year for all other issues mentioned. The increase in risk premiums is also listed on the risk monitor for the first time.
The risk monitor also deals with a selected trend that could affect the Swiss financial market in the long run. In this year’s report, Finma examines decentralized finance applications in open access blockchain infrastructures. As Finma wrote, these are trending worldwide and have gotten a lot of attention lately.
However, the use of such applications also carries risks. Consumers primarily risk loss of assets due to, for example, significant market fluctuations, input errors, errors in applications, hacking or fraud. When it comes to corporate users, the focus is on operational, legal and reputational risks. But so far Finma still hasn’t seen any systemic risk due to low volume.
In its risk monitor, Finma provides an annual overview of what it considers to be the most important risks to the financial market players it oversees. The authority then shifts the focus of its audit activities from these risks.
(SDA)