Banks can find themselves in situations where they need large amounts of liquidity quickly. It is therefore important for all banks to be able to obtain liquidity from the Swiss National Bank (SNB) when necessary. Against this backdrop, the SNB regularly reviews its framework for supplying banks with liquidity.
Thus, in 2019, the SNB launched an initiative with the aim of ensuring that the central bank can provide liquidity to all banks in Switzerland should the need arise. Under this initiative, mortgages are used as collateral. This possibility of drawing liquidity has far-reaching implications, since mortgages in Switzerland constitute over 85% of domestic credit volume.
Now, SNB is going one step further by making it possible for all banks in Switzerland to obtain liquidity against a broad range of securities, in particular less liquid bonds issued by borrowers with lower credit ratings, as well as securitizations and shares in various currencies. Systemically important banks have been able to obtain liquidity against such securities for many years already.
“In future, banks should therefore be required to permanently hold ready a certain volume of collateral for the purpose of obtaining liquidity from the SNB, said Martin Schlegel, vice chair of the SNB’s Governing Board at a press conference.