ZURICH (Reuters) -Swiss banks have to pay more currently to secure liquidity in the financial markets than two years ago, the Swiss National Bank said on Thursday, pointing to the 2023 collapse of Credit Suisse and takeover by rival UBS as one explanation.
Between mid-2023 and end-2024, banks’ funding costs increased significantly for bonds and in the money market, SNB governing board member Petra Tschudin said at an event in Geneva.
These costs have recently declined somewhat, but they remain elevated, which can affect the pricing and granting of loans, she added.
One reason for the higher funding costs is the state-engineered merger of UBS and Credit Suisse in March 2023, which increased the number of customers turning to domestically focused banks, according to the SNB.
Customers who previously did business with both UBS and Credit Suisse looked for additional banking relationships to reduce their reliance on a single big bank, Tschudin said.
This has meant more customers switching to Swiss domestic banks, pushing up demand in the Swiss capital market, especially as local banks have less access to international borrowing.
The shift to smaller banks may have increased due to UBS not offering the same conditions as Credit Suisse, Tschudin said.
“Unlike the former Credit Suisse, many of the domestically focused banks have little or no presence abroad, so their investor base is narrower.”
“This has led to a corresponding rise in domestic funding needs,” she said, a situation which had pushed up funding costs as banks compete for liquidity.
Other factors included a rise in government bond yields as central banks bought less government debt and a more challenging liquidity environment in general.
“In summary, bank funding costs, as measured by swap spreads, have risen noticeably in recent quarters,” Tschudin said.
She also said despite the rise in funding costs, credit growth in Switzerland remains robust.
“Our monetary policy thus remains effective,” Tschudin said.
(Reporting by Ariane Luthi. Editing by Jane Merriman)
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