FINMA Warns Swiss Banks on Risky Mortgage Practices Amid Housing Market Concerns

Switzerland’s financial regulator, FINMA, has issued a stark warning to banks over lax mortgage lending standards as property prices reach record highs. Chief Executive Stefan Walter criticized institutions for excessive exceptions to internal benchmarks, with deviations ranging between 25-40% of cases. "This undermines both bank stability and customer protection," he stated in an interview.

The alert follows FINMA's annual risk review highlighting systemic vulnerabilities. Competitive pressures in an oversaturated market are driving reckless lending, particularly as rising real estate values create perverse incentives. Analysts caution that overvaluation and loose credit could trigger contagion if market conditions deteriorate.

External threats compound these risks—sanctions, geopolitical conflicts, and volatile bond markets now pose elevated challenges. Walter emphasized that Swiss banks must fortify balance sheets against potential shocks. The housing sector's fragility mirrors crypto market dynamics where leverage and speculation periodically test systemic resilience.