Generally positive assessment of 2019 by the FMA – banks are in good shape for the expected recession

The LBA is pleased with the generally positive assessment. The following aspects are especially noteworthy:

• Despite a challenging global environment, the Liechtenstein banking centre remained on its growth path in 2019. Assets under management, including at foreign group companies, rose by 14.6% to nearly CHF 350 billion. Of that amount, almost 50% were attributable to the banks in Liechtenstein. All business locations, especially the Liechtenstein home market, contributed to the positive results. The net inflow of new money to the Liechtenstein banks, including foreign group companies, amounted to approximately CHF 20.4 billion in 2019.
• Earnings before tax for the banking sector increased by about 20% over the previous year to nearly CHF 640 million. These results show that the local banks' business models are resilient. The strategy based on the pillars of sustainability and digitalisation, which has been pursued for many years now, also contributed to these positive results in 2019.
• The condition of the banking sector remains stable. The financial market turbulence in recent weeks has had only a very limited impact so far. The solvency and liquidity ratios, which are well above average compared with other financial centres, and the comparatively conservative business models entail a high degree of resilience. For instance, the Tier 1 capital ratio at the level of individual banks (without foreign group companies) exceeded 21% at the end of 2019.
• This strength is the basis for ensuring that the banks have been able to play their important role as liquidity providers to the hard-hit real economy in recent weeks. According to the FMA, the banks in this way make an important contribution to overcoming the crisis.
• In a severe recession, negative second-round effects are also likely to impact the financial sector. A decline in assets under management will adversely affect profitability in the medium term. The rate of non-performing loans – as a result of corporate bankruptcies and higher unemployment – could also rise. Despite this, the FMA considers the domestic banking sector to be in very good shape to face the challenges ahead, given its strong starting position.