The Swiss banking industry enjoyed a strong 2005 thanks to economic expansion, high returns in equity markets, cost-cutting and improved risk assessment and management, according to the International Monetary Fund.
In its annual Article IV Consultation on the Swiss economy, the IMF noted that Swiss banks are well capitalized, liquid, and profitable, and have developed a "substantial" resilience to shocks.
The IMF also observed that retail banking has become more competitive, with significant growth in mortgage lending and asset management.
However, the report warned that lending standards, interest rate and credit risks, and risk transfer must be carefully monitored after a long period of historically low interest rates, which are now beginning to rise. The report also cautioned against risks that may arise from "an abrupt unwinding of global imbalances".
"The ability of the authorities to assess systemic risk has improved through stronger banking supervision," the IMF report stated.
Nevertheless, the Fund advised that risk assessment could "further benefit from additional stress tests by the large banks using scenarios specified by the SNB in collaboration with the Banking Commission".
The report also noted that the corporate health of the Swiss insurance industry has improved, based on restructuring, strengthened supervision, improved risk management, and strong performance in the equity markets.
"The catastrophic natural events in the United States affected the profitability of the reinsurance industry, but its overall performance remains good," the IMF stated.
The full text of the IMF's Concluding Article IV Statement on Switzerland can be found in the Tax News Resources section.
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