ZURICH, Nov 11 (Reuters) - Financial risks related to the coronavirus pandemic will last for months if not years, Switzerland’s financial market supervisor FINMA said on Wednesday, pointing to particularly heightened risk of defaults on corporate loans.
“Thanks to the cushion of liquidity and capital they have built up over the years and their operational readiness, Swiss financial institutions have been able to withstand the initial repercussions of the crisis well,” FINMA said in its second annual financial risk monitor.
“However, the effects of the corona pandemic will continue to impact the financial markets for months, if not years.”
Turmoil in capital markets, money market bottlenecks and defaults on corporate loans had all placed a strain on the financial system.
Banks -- especially Switzerland’s two big banks, UBS and Credit Suisse -- were exposed to heightened risks of debtor bankruptcies and writedowns on loans to corporate clients outside Switzerland, which has experienced a less pronounced downturn than many other countries.
The pandemic’s hit to commodities trading had also caused Swiss banks to write down roughly half a billion Swiss francs in assets related to such trading through September, FINMA said.
Insurers were exposed to corporate risks as well through the risk of sharp price corrections on corporate bonds, FINMA said, noting some 19% of insurers’ investments were placed in corporate bonds, with nearly half of those in bonds with a rating of BBB+ or lower. (Reporting by Brenna Hughes Neghaiwi; Editing by Michael Shields)
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