Switzerland: Financial Sector Stability Assessment; imf country Report 14/143; April 16, 2014

4. Swiss banking sector balance sheets are following divergent trends, with substantial 
deleveraging by the large banks while domestic banks are growing rapidly. The size of the 
sector has fallen by 16 percent since the peak of the crisis. However, the balance sheet dynamics 
differ significantly across bank categories. The two large banks been challenged to meet regulatory 
requirements and change business models. In contrast, domestic banks have registered a huge 
expansion because of the strong growth in mortgage finance.
5. Credit has seen strong growth. Mortgage lending growth has been about 5 percent per 
year since 2009, and mortgage debt recently reached about 145 percent of GDP—high in both 
international and historical comparisons (Figure 1). With rising mortgage lending, already high 
household debt (mostly consisting of mortgages) has risen further, with mortgages to households 
well above 100 percent of GDP. Mortgages are traditionally of fairly short maturity, which implies 
frequent refinancing, leaving borrowers exposed if interest rates should rise from the current very 
low levels. Residential real estate prices are elevated and, compared to the consumer price index, 
owner-occupied apartment prices are at an all time high (Figure 2). Also, compared to income, 
prices for owner-occupied apartments are substantially above their long-run average. 

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SWITZERLAND
INTERNATIONAL MONETARY FUND
11 
Figure 1. Switzerland: Total Mortgages 
(In percent of GDP) 
 
Sources: SNB, World Economic Outlook (WEO), International Financial Statistics (IFS), IMF staff estimates.
Figure 2. Switzerland: Real Residential Real Estate Prices
(Index) 
 
Source: Wuerst & Partner, IFS.