In the category of non-financial risks, Finma this year highlights those associated with sanctions. Trade restrictions in financial services expose financial institutions to the risk of violating sanctions.
The Federal Financial Market Supervisory Authority (Finma) published its report on Monday which provides an overview of the most significant risks weighing on the financial sector. For this year, she notes an increase in risks in terms of sanctions and in the cyber domain.
Finma notes great uncertainties due to current geopolitical tensions. The risk linked to interest rates has decreased but caution remains essential.
“In the current situation, we should not rule out the possibility of a further rise in government or corporate credit spreads,” notes Finma director Stefan Walter. Certain countries and the corporate sector indeed display a high level of debt, which could increase further due to increased geopolitical tensions,” according to him.
Reputation at stake
In the category of non-financial risks, Finma this year highlights those associated with sanctions. Trade restrictions in financial services expose financial institutions to the risk of violating sanctions.
For foreign sanctions, legal and reputational risks have increased significantly. If the risks materialize, they could have serious consequences for the establishments concerned but also for the reputation of the financial center.
With regard to the sanctions taken against Russia, Finma has expanded its database and is carrying out on-site checks as well as investigations relating to the management of sanctions with exposed taxable persons. The good reputation of the Swiss financial center is at stake, according to Stefan Walter.
Cyber
Cyber risks also remain very high. More than half of the cyberattacks reported to Finma affect financial institutions indirectly through attacks on third parties, the report indicates.
For Finma, it is necessary to strengthen the controls of service providers carrying out essential tasks for financial institutions. It will therefore, on the one hand, emphasize effective management of outsourcing by financial institutions and, on the other hand, will carry out more on-site checks on the main service providers.
Nine risks
The main financial risks handled by Finma are credit risks linked to real estate and mortgages, credit risks linked to other loans, yield gap risks as well as liquidity and refinancing risks.
On a non-financial level, these are risks linked to sanctions, difficulties in accessing foreign markets, the fight against money laundering, the outsourcing of operational activities and cyberattacks.
