Three quarters of the institutes anticipate a sharp rise in value adjustments and provisions in the short term.
Due to the virus pandemic and its effects on the economy, Swiss banks are preparing for increasing loan defaults. Three quarters of the institutes expect a sharp increase in value adjustments and provisions for loans to small and medium-sized enterprises (SMEs) in the short term, according to a survey published on Thursday by the consultant EY of 100 banks.
In the previous year it was only twelve percent. Skepticism has also risen in the home finance business. 36 (previous year seven) percent of the banks assumed increasing defaults in the next six to twelve months.
Regional banks are likely to be hit hardest by the failures, according to EY. Because they are heavily involved in the SME business and do not have a commercial business that could cushion this slump.
The EY experts also pointed out that the increase is starting from a very low level. In the past 20 years there have been practically no failures. In addition, the banks only expected a short phase of increased risk provisioning. They justified this with their healthy loan books and the resilience of Swiss SMEs. “The banks are not facing this crisis on their knees softly,” said EY expert Timo D'Ambrosio.
