S&P confirms low risks for Liechtenstein's banking sector
In addition to the country assessment, Standard & Poor's also carries out a risk assessment of the banking sector every year with the so-called BICRA (Banking Industry Country Risk Assessment). In its new report dated 12 July 2022, Standard & Poor's stated that the economic risk Liechtenstein’s banking sector is relatively low in a global comparison. The Liechtenstein banking sector thus continues to belong to BICRA Group 2, together with Switzerland, Singapore, Hong Kong and Luxembourg.
In its report, Standard & Poor's (S&P) continues to assess the economic development in Liechtenstein as stable. S&P expects domestic banks to prove resilient to economic uncertainties (global supply disruptions and increased commodity prices). This will also have an impact on the domestic, export-oriented economy. In S&P's judgement, Liechtenstein is resilient, competitive and extremely flexible. S&P describes the legal framework as very effective, fair and predictable, which is why an orderly development of the laws without sudden changes can be expected in the future. Rather, the efficient political system allows the country to adapt agilely to external political challenges by introducing regulatory reforms, such as the law on tokens and trusted technologies for service providers, which has been in force since January 2020.
Specifically, S&P positively highlights the significant progress made over the past decade in implementing anti-money laundering and tax evasion prevention regulations. S&P also acknowledges that the Principality has developed into a transparent financial centre over the past ten years, which was confirmed by the latest MONEYVAL report, published in June 2022, which proves that Liechtenstein has an effective system for combating money laundering and terrorist financing (AML/CFT).
The banks rated by S&P have strong or above-average risk-adjusted capital ratios. This shows that they aim for strong capitalisation above short-term shareholder returns, which in turn provide high confidence in the domestic banking sector and is an important consideration for clients and their long-term wealth planning.
The reconfirmation of the low risk and the classification in Group 2 of the BICRA once again underlines the resilience and stability of the local banking centre. In view of the currently extremely high political and economic global uncertainties and the ongoing war in Ukraine, this cannot be taken for granted. The Bankers Association is convinced that the government's decision to start accession negotiations with the International Monetary Fund (IMF) is an important contribution to further strengthening this good starting position for the country and the financial and banking centre.
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