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

27. Stress tests covered the majority of the Swiss banking system. TD balance sheet stress 
tests were conducted by the authorities on all licensed banks, and by the IMF FSAP team on 30 
representative banks (about 85 percent of the system’s total assets). These stress tests were 
complemented by BU stress tests conducted by the two large banks, which also covered other risk 
factors, including credit, market, contagion (through interbank exposures), liquidity, funding, and 
operational risk. 
28. No bank-by-bank supervisory data were provided to the mission, owing to legal 
constraints. Hence, IMF FSAP stress tests were conducted using publicly available data and proxies 
estimated by the staff at an aggregate “group” level, which limited the confidence that could be 
attached to any institution specifically.  
0
500
1,000
1,500
2,000
Santander
Lombard Odier & Cie
Bank of New York Mellon
Northern Trust
Julius Bär
Barclays
ABN AMRO
Goldman Sachs
Citigroup
JPMorgan Chase
Pictet
BNP Paribas
Deutsche Bank
HSBC
Royal Bank of Canada
Credit Suisse
Morgan Stanley
Wells Fargo
Bank of America
UBS

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SWITZERLAND
18 
INTERNATIONAL MONETARY FUND
Table 2. Switzerland: Macroeconomic Scenarios for the Stress Tests of the Banking Sector 
 
The stress tests involved four scenarios: a baseline scenario (based on recent Article IV projections), and three 
alternative “stress” scenarios. “Adverse Scenario 1” assumes an intensification of stress in the euro area periphery, 
while the core countries continue to muddle through. Switzerland is seen as a safe haven, and capital inflows 
intensify. The SNB “recalibrates” the exchange rate floor, and allows the exchange rate to “overshoot” (reaching 
parity to the euro in 2014), before returning to the current levels toward the end of the stress test horizon. 
“Adverse Scenario 2” assumes there is a severe global shock, perhaps caused by the disorderly unwinding of UMP. 
The global economy is adversely affected in tandem with global financial markets. The mispricing of risk assets 
translates into a broad-based correction in valuations. Real GDP growth falls sharply owing to Switzerland’s (real 
and financial) linkages to the rest of the world.
1
Finally in “Adverse Scenario 3” there is a significant correction in residential house prices, of a magnitude in line 
with that seen in the 1990’s, potentially triggered by a rise in real interest rates. 
The behavior of macroeconomic variables was quantified using historical trends and empirical relationships, and 
based on satellite models. In Adverse Scenarios 1 and 2 real GDP growth and exchange rate assumptions are the 
main drivers of all other variables in the projections. In Adverse Scenario 3, the assumed paths for house prices and 
the exchange rate are the main drivers, while other variables react to them.