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

Switzerland: FSAP Stress Test Macro-Scenarios in a Historical Context 
(Switzerland: Real GDP Level) 
All scenarios were fine-tuned based on discussions with the authorities. 
Projections for global macroeconomic variables, including those of Switzerland’s main trading and financial 
partners, were constructed by the IMF’s Research Department (RES), using their own models, consistent with the 
adverse macro-scenarios in the WEO), and scaled using the projections for the Swiss domestic macroeconomic 
variables.
Source: IMF staff calculations. 
1
This economic scenario is more severe in terms of losses in the level of output than that experienced in Switzerland during the 
GFC (2008–09) and the recession of the early 1990’s (see figure above).
 
94
96
98
100
102
104
106
108
-1
0
1
2
3
4
5
"Early 90's" Recession (1990=100)
Global Financial Crisis (2008=100)
FSAP baseline scenario (2013=100)
FSAP "adverse scenario 1" (2013=100)
FSAP "adverse scenario 2" (2013=100)
FSAP "adverse scenario 3" (2013=100)
Years 

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SWITZERLAND
INTERNATIONAL MONETARY FUND
19 
Solvency of the banking system 
29. Stress test results suggest that the banking system as a whole is sufficiently 
capitalized, although the results for the two large banks are sensitive to the definition of capital 
(Figure 7). Using the current Core Tier 1 capital definition (i.e., allowing for the phase-in transition 
period embedded in Basel III rules) as starting point, these banks’ capital ratios comfortably exceed 
capital requirements under all scenarios, and capital does not fall below the 7 percent threshold. 
However, under the most severe macroeconomic scenario (Adverse Scenario 2), using the “fully 
loaded” common equity tier 1 (CET1) capital 2019 definition (under Basel III), capital ratios could 
fall below the 7 percent threshold.
6
These results suggest that the systemic banks are well placed 
vis-à-vis the introduction of Basel III, but should continue decisively with their capital build-up to 
further enhance their resilience (Figure 8).