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Liechtenstein financial sector remains stable

25 Mar 2024
Vaduz - The financial sector of the Principality of Liechtenstein remains stable despite the array of risks in evidence at international level. This is the conclusion reached by the Financial Stability Council. The macroprudential supervisory body will continue to keep an eye on the development of profitability in the banking sector and any risks on the commercial real estate market.

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The weak economic landscape across the eurozone has recently brought about negative impacts on export growth and the economy in Liechtenstein, as the Financial Stability Council (FSC) writes in a press release on behalf of the government of the Principality of Liechtenstein. At its most recent meeting, the country’s official macroprudential supervisory body discussed the economic environment, associated risks and their impact on the financial sector within Liechtenstein. According to the FSC, the financial sector in Liechtenstein remains stable despite significant risks at international level.

The domestic banking sector has enjoyed a successful year, the press release states. However, the cost-income ratio, which is on the high side in comparison with international standards, may well result in «declining profitability in the medium to long term», the press release states. The FSC intends to remain vigilant in this area in order to head off any potential systemic risks.

The FSC will also be keeping an eye on the commercial real estate (CRE) sector. While the CRE market plays a less significant role in terms of the financial stability in Liechtenstein, according to the FSC, it will nevertheless continue to monitor the relevant developments in this area.

The countercyclical capital buffer, which is a tool at the disposal of banks to boost their resilience, is to remain unchanged at 0 percent of the total risk exposure this year. The FSC has not uncovered any signs of increasing imbalances in either the credit gap or other cyclical indicators. ce/hs