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Banks generally take too much risk when they make loans to buy residential mortgages. This is the view of the National Bank (SNB), which politely but firmly communicated to the banks in June during its "Balance Sheet". SNB Vice President Fritz Zurbrügg called for "targeted measures" in a speech. These loans do not buy the property for self-use. But multifamily homes are acquired to generate a return on rental income.
The National Bank is not, however, responsible for banking supervision. As she emphasized in her assessment of the situation, this is the responsibility of the Financial Supervisory Authority. The Finma, for its part, announced soon after that she had already "discussed with various authorities in order to consider other measures". It will probably be the SNB itself and the State Secretariat for International Financial Affairs
What "other measures" will be examined – SNB Vice Zurbrügg has not revealed anything concrete in its June speech. On the other hand, the SNB has written some references in its stability report published the same day. On page 35, two categories of actions are briefly described, and a footnote refers to page 48 of Finma's current annual report, published in March
. One measure would be to adjust the rules according to which loans for multifamily investment be talked about. To do this, the authorities would revise the appropriate regulations or the banks' self-regulation. These rules, which the banks themselves can give and declare binding for Finma, were tightened in 2012 and 2014. The Finma had exerted considerable pressure behind the scenes
The sign of the closing with the closing of SNB and Finma was obviously understood. According to knowledgeable circles, there are corresponding discussions in the Bankers Association. "It is the authorities who are the most solicited, so you do not have to do it yourself," says a representative of the bank. But banks, with their different interests, must first agree: do they want to revise self-regulation in the first place and, if so, how?
The Bankers Association does not want to deny the deliberations. On request, a spokeswoman said: "Unfortunately, we can not give any information at this time." The association has already adapted its public attitude to the demands of the SNB. After the appearance of the SNB, Deputy Zurbrügg was harsh: "All the extra measures are critical to us." It is now said that he has a "regular exchange" with the authorities.
What rule changes would be possible, argue UBS economists in a report. For example, loans for investment in multi-family housing could be mandated: banks must support them with more capital; the loan can not exceed a certain proportion of the investment (degree of loan); The investor must repay the loan faster (depreciation).
Less risk, more equity
As highlighted by the SNB in the stability report, NBIF will strengthen, as previously announced, the supervision of banks operating in the market. are particularly exposed for the residential real estate yield. These banks would individually receive orders: reduce risk or increase your own funds for such investments. In good German Schlaumeier is more difficult to attack.
These intelligent eggs – or "ostentatious institutions" in Finma jargon – it seems that on the market of apartment buildings to give. The Finma should recall in the annual report the basic principle: "Monitoring FTE developments over time is an important task of the board." FTEs are "exceptions to policy" ; that is, transactions for which the guidelines are not respected as exceptional cases. On request, a spokesperson explains: "We have seen an increase in ETP transactions for individual players."
Run on Multifamily Homes
This exception is dangerously close to the standard in the multi-family residential investment market. In 2017, for example, the guideline on portability was regularly violated in 2017. With just over half of all new mortgages available, rents would be insufficient to amortize and maintain the loan, and the rates to be paid. interest would reach 5%.
This accumulation of transactions is probably the inevitable result of record interest rates. Banks that operate primarily in the country, their lines of credit are a little more broken each year. By the end of 2017, they were on average one-third less than ten years earlier. To absorb this, they gave more mortgages: 4% more solitary in 2017, which is twice as much as the economic growth of the time.
The stream of mortgages fueling a race on multifamily homes. Prices have risen 60% over the past 10 years, although they do not earn more money: rents are only 10% higher. But he is bought further; Government bonds lose less. High prices, high mortgages – inevitably, the portability guidelines are not respected. More investors should spend all their rental income for loan service, increasing interest rates to 5 percent.
So all the screws are lit which affect in one way or another the output. An example of this can be found in the stability report. Of all the mortgages that commercial investors signed last year, 45 percent were short term with maturities of less than one year. The interest rate is lower than that of mortgages that last ten years. But the investor faces financial problems faster, if mortgages become more expensive. The SNB also warns in its report on stability
. Stopping these mechanisms with "targeted measures" may be tricky. At least UBS economists warn in the mentioned report of "distortions" and "alternative strategies of investors". With stricter rules, multifamily homes would be financially profitable only at peripheral sites. "Investors could be pushed into a higher risk segment", so even more risky bets. And in the end, cheap money could only sink into the real estate market via "new credit channels."
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