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Financial stability

A stable financial system

Financial stability is a key prerequisite for the functioning of a national economy and for the effective implementation of monetary policy. A stable financial system can be defined as a system whose individual components – financial intermediaries and the financial market infrastructure – fulfil their respective functions and prove resistant to potential shocks.

The SNB mandate

Under the National Bank Act, the SNB has the task to contribute to the stability of the financial system. Moreover, the Act assigns the oversight of systemically important financial market infrastructures to the SNB.

In the field of financial stability the SNB cooperates with the Swiss Financial Market Supervisory Authority FINMA. A Memorandum of Understanding (MoU) contains a clear division of the individual responsibilities of the two institutions and regulations on their cooperation.

How the SNB promotes financial stability

Analysis and research: The SNB analyses the developments in the financial markets and in the area of financial market infrastructure. It pays special attention to the Swiss banking industry and the financial market infrastructures.

Promotion of an appropriate framework for the financial centre: At the national level, the SNB - in conjunction with the Confederation and the Swiss Financial Market Supervisory Authority (FINMA) - participates in reform projects (www.sif.admin.ch). At the international level, the SNB is permanently represented on the Basel Committee on Banking Supervision and on the Committee on Payments and Market Infrastructures (CPMI) of the Bank for International Settlements (BIS, www.bis.org), as well as on the Financial Stability Board (FSB, www.financialstabilityboard.org).

Liquidity assistance: The SNB acts as lender of last resort (LoLR). In this function, it can – under certain conditions – provide liquidity assistance against collateral if domestic banks are no longer able to refinance their operations in the market (cf. Guidelines on Monetary Policy Instruments and dossier 'The SNB's role as lender of last resort').

Oversight: The SNB is responsible for overseeing financial market infrastructures, focusing primarily on systems that are of importance to the stability of the Swiss financial system. The supervision of Switzerland’s banking sector is the responsibility of the Swiss Financial Market Supervisory Authority (FINMA) (www.finma.ch).

Instruction sheet governing liquidity against mortgage collateral (LAMC)

The LAMC initiative expands the possibilities for liquidity support beyond the systemically important banks to the banking sector as a whole. The SNB had launched this initiative in 2019 and presented it to the public at its news conference in September 2023. As part of its contribution to ensuring financial stability, the SNB can grant liquidity to Swiss banks active in the mortgage business, provided they have made the requisite preparations. LAMC further increases the resilience of the banking sector and contributes to efficiency gains thanks to the digitalisation of the entire process.

This instruction sheet and its annexes set out the conditions and operational requirements for LAMC. Supplementary process instructions are provided by SIX Terravis. Interested banks can order the detailed annexes to the instruction sheet from the SNB. These include agreements, instructions and the declaration of participation.

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