## 1cheea2026001 ## Source details **Canonical URL:** [1cheea2026001](https://www.imf.org/-/media/files/publications/cr/2026/english/1cheea2026001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2026/english/1cheea2026001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2026/english/1cheea2026001.pdf.json) --- ### Context and recent economic developments - Switzerland has maintained stability amid global volatility due to strong policy frameworks and a highly flexible economy. - Growth and inflation - Growth: 1.5 percent in 2025 (adjusted for international sporting events); 0.4 percent yoy in 2026:Q1. - Staff baseline projections: 2026 growth (adjusted) 0.8 percent (1.1 percent non-adjusted); 2027 growth (adjusted) 1.5 percent (1.2 percent non-adjusted). - Headline inflation: 1.1 percent in 2024 → 0.2 percent in 2025 → 0.5 percent in June 2026. - Core inflation: 0.3 percent (June 2026). - Short-term inflation expectations: 0.8–1.2 percent; long-term around 1 percent. - Labor market - Unemployment: 3.0 percent. - Employment growth: 0.2 percent yoy in 2026:Q1. - External and fiscal positions - Current account surplus: 6.4 percent of GDP in 2025. - SNB foreign reserves: CHF 711 billion at end-May. - Public debt: around 40 percent of GDP. - General government overall surplus: 0.3 percent of GDP in 2025 (narrowed from 0.4 percent in 2024). - Pension fund assets: CHF 55 billion at end-2024; 13th monthly pension payment raises expenditure by 0.5 percent of GDP in 2026 (financed mainly by drawing down pension fund assets). ### Policy mix, monetary stance, and financial system soundness - Monetary policy and SNB actions - Policy rate: set at zero since June 2025. - SNB lowered minimum reserve threshold factor from 18.5 to 13.5 since November; remuneration reduced by 0.25 ppt on SNB deposits above level calculated from this factor. - SNB intervened modestly in 2026:Q1 to address appreciation pressures; FX interventions data published only starting 2020. - SNB began publishing summaries of monetary policy discussions (October 2025). - Fiscal stance - Modest fiscal expansion underway; no supportive measures introduced in 2026 in response to higher energy prices since March. - VAT increases will keep the Confederation’s balance broadly unchanged; balance of social security funds expected to deteriorate. - Federal deficit: will remain at 0.2 percent of GDP in 2026 (federal level); pension increase shifts general government overall balance into a deficit of 0.1 percent of GDP (overall deterioration of 0.4 percent of GDP, 0.2 cyclically adjusted). - Banking and NBFI metrics - Aggregate Tier 1 regulatory capital ratio: above 20 percent (end-2025). - Liquidity coverage ratio (LCR): 175 percent at end-2025. - Non-mortgage credit: up 6.7 percent yoy in April 2026 (rebounded in 2026:H1); declined 2.1 percent in 2025. - Mortgage growth: 3.1 percent in 2025. - Owner-occupied housing prices: rose 4.5 percent (2025). - Pension funds: median yield 5.5 percent in 2025. - FSAP (2025) found financial system highly resilient to an adverse scenario. ### Outlook, risks, and scenario results - Baseline assumptions: weak trading-partner growth, heightened geopolitical uncertainty, commodity prices increase substantially this year then recede, US tariffs on Switzerland set at 12.5 percent; monetary stance expected to remain unchanged short term. - Baseline inflation and growth projections - Average inflation 2026: 0.6 percent; 2027: 0.6 percent; 2028: 0.7 percent. - Growth stabilizes at potential rate 1.5 percent over medium term. - Scenario table (selected figures from Text Table 1) - Real GDP Growth (adj. for sporting events): - April WEO: 2026 = 1.0; 2027 = 1.6 - Baseline: 2026 = 0.8; 2027 = 1.5 - Adverse Scenario: 2026 = 0.7; 2027 = 1.3 - Severe Scenario: 2026 = 0.4; 2027 = 1.0 - Inflation: - April WEO: 2026 = 0.5; 2027 = 0.5 - Baseline: 2026 = 0.6; 2027 = 0.6 - Adverse Scenario: 2026 = 1.1; 2027 = 0.7 - Severe Scenario: 2026 = 1.3; 2027 = 1.3 - Staff shock impacts (QIPF-derived) - Adverse global downside: reduces Swiss real GDP by around 0.3 ppt. over two years vs baseline; inflation rises by around 0.5 ppt. in year 1 and 0.1 ppt. in year 2. - Severe scenario: reduces real GDP by 0.9 ppt. over two years vs baseline; inflation rises by 0.7 ppt. in both years vs baseline. - Risks - Tilted to the downside: elevated geopolitical tensions, renewed energy price spikes, additional US tariffs, entrenched trade fragmentation. - Upside: lower energy prices and easing geopolitical tensions. ### TBTF reform status and supervisory powers (Box 2 highlights) - Legislative progress and timing - Reforms proposed June 2025 by the Federal Council; legislative process expected to be lengthy; key measures unlikely before 2028. - Federal Council decided reforms will enter into force from October 2026. - Key proposed measures and impacts - Enhanced Early Intervention: FINMA would gain stronger early tools; currently out for consultation. - Senior Managers Regime: applies to banks with 250 or more employees; currently out for consultation. - Capital quality proposals: - Phase out software assets from capital over three years; estimated impact reduce UBS’s CET1 by around US$4 billion. - Require G-SIBs to fully deduct book value of foreign subsidiaries from parent CET1 capital; would raise UBS’s CET1 capital requirements by US$20 billion; reform gradual beginning no earlier than 2028. - Finalized capital rules exclude Deferred Tax Assets (DTAs); including DTAs would have reduced UBS CET1 capital by around US$7 billion. - Safety net and resolution - SNB will open an Extended Liquidity Facility (ELF) / ELF scheduled to go into operation at beginning of 2027; SNB defined standardized, scalable process and is testing with pilot banks and SIX Terravis and SIX SIS until mid-2026. - Staff recommends a public liquidity backstop (PLB) would further strengthen crisis-management framework; TBTF package includes a PLB instrument for SIBs in ordinary law. - Supervisory powers and enforcement - Recommendations: strengthen FINMA’s resources, powers, enforcement capabilities; reduce ability of legal appeals to suspend FINMA action; enable FINMA to fully mandate, oversee, and pay for external regulatory auditors (current TBTF package grants FINMA responsibility to approve external auditors but not to oversee or pay them). - Staff recommendations (selected) - Proceed with passage and implementation of TBTF reforms; require G-SIBs to fully capitalize foreign subsidiaries with CET1 capital; introduce public liquidity backstop; strengthen FINMA’s resources and enforcement; continue vigilance on residential real estate vulnerabilities and NBFI risks; formalize macroprudential institutional arrangements and add borrower-based measures. ### Macroprudential and housing market recommendations - Establish a dedicated macroprudential committee, ideally chaired by the SNB. - Tighten macroprudential policies: - Introduce a debt service-to-income (DSTI) limit, phased in with an exempted loan quota. - Top up risk weights under Basel III Final capital rules to address affordability-related credit risks. - Additional measures: - Streamline approvals and facilitate permitting to increase housing supply. - Note: LTV caps in self-regulation appear effective but share of loans not meeting FINMA affordability benchmarks is rising. - Current settings: - Property-related loans account for 86 percent of bank lending. - One fifth of property-related loans are at variable rates. - Sectoral countercyclical capital buffer at maximum 2.5 percent. ### Banking sector concentration and monetary transmission (Annex I) - Size and concentration - Sectoral assets: 360 percent of GDP at end-2025. - UBS accounts for 37 percent of system assets; UBS’s assets larger than national GDP. - Three domestic SIBs (Zurich Cantonal Bank, Raiffeisen, Post Finance): 19 percent of system assets. - Domestic lending - Domestic loans: 22 percent of UBS’s total assets. - UBS domestic credit market share rose to around one-quarter at end-2023 post-acquisition, later declined as combined bank scaled down lending. - Mortgage NBFI participation (2024): life insurers 2.7 percent; pension funds 2.5 percent of mortgage stock; life insurers and pension funds underwrote 5 percent of mortgages in 2024. - Monetary policy transmission regression results (cumulative 12-month pass-through coefficients, staff table) - β (overall pass-through): - Savings deposit rate: 0.195 - Time deposit rate, 1-month: 0.644 - Time deposit rate, 3-month: 0.728 - Time deposit rate, 6-month: 0.765 - Time deposit rate, 12-month: 0.794 - Variable mortgage rate: 0.084 - Fixed mortgage rate, 5-year: 0.569 - Fixed mortgage rate, 10-year: 0.409 - λ (impact of increasing banking sector concentration on pass-through): - Savings deposit rate: 0.221 - Time deposit rate, 1-month: 0.092 - Time deposit rate, 3-month: 0.026 - Time deposit rate, 6-month: -0.004 - Time deposit rate, 12-month: -0.081 - Variable mortgage rate: 0.054 - Fixed mortgage rate, 5-year: 0.133 - Fixed mortgage rate, 10-year: 0.234 - θ (impact of NIRP on pass-through): - Savings deposit rate: 0.067 - Time deposit rate, 1-month: -0.222 - Time deposit rate, 3-month: -0.316 - Time deposit rate, 6-month: -0.385 - Time deposit rate, 12-month: -0.440 - Variable mortgage rate: 0.013 - Fixed mortgage rate, 5-year: -0.491 - Fixed mortgage rate, 10-year: -0.562 - Key implication: Post-acquisition pass-through to mortgage and deposit rates shows no clear weakening; concentration increases raise reallocation challenges in systemic distress. ### Competitiveness, exchange rate, and exports (Annex III) - Exchange rate moves - NEER: appreciated by 3.6 percent relative to 2025 average in May 2026. - REER: appreciated by 1 percent relative to 2025 average in May 2026. - Export structure and elasticities - High value-added sectors (chemicals, pharmaceuticals, clocks and watches, machinery) account for over half of goods exports and have relatively low exchange rate elasticities. - Value of Top Trading Goods (Billions of Franc): - Other Exports: 53.0 - Optical and medical...: 17.4 - Machinery: 25.7 - Clocks and watches: 35.1 - Chemicals: 42.4 - Pharmaceutical products: 96.0 - Precious stones and metals: 119.1 - Overall REER elasticity: around 0.65 (absolute terms), below cross-country average 0.77. - Export performance during appreciation episodes (2006–2025 goods export growth) - Switzerland*: Appreciation Episodes -1.41% ; Other Episodes 1.23% - (Other countries listed in source for comparison.) - Policy implications - Monetary policy should remain flexible; consider FXI to prevent de-anchoring of inflation expectations if safe-haven inflows threaten anchoring. - Support firm diversification of supply networks, energy security, cooperation to diversify demand, and innovation in high value-added sectors. ### QIPF model scenario analysis and policy implications (Annex V) - Model calibration and assumptions - Model calibrated with inflation and policy rate at zero, long-run inflation 1 percent, ELB set at −1 percent. - Exchange-rate pass-through: cumulative pass-through of 1-percent appreciation to headline inflation after one year estimated at 0.12 percentage point for Switzerland. - Correlation: Changes in NEER and long-term inflation expectations correlation coeff.: -0.4071 (p-value: 0.0041). - Selected scenario outcomes - Scenario 1 (severe global demand + UIP premium shock): negative global demand shock reduces Swiss GDP by 3 percent and inflation by 1 percent; combined with safe-haven flows output losses increase to 3.7 percent and inflation to about −2.6 percent due to franc appreciation; policy rate at ELB for about ten quarters when combined. - FXI illustrative size: analysis considers FXI increase of 11 percent of GDP; FXI can reduce ELB duration and dampen GDP contraction and disinflation but requires substantial purchases and carries balance-sheet risks. - Scenario 2 (inflation expectations anchored very low): policy rate at ELB for 16 quarters (vs 10 quarters when expectations higher); FXI at ELB can help re-anchor expectations. - Scenario 3 (oil price shock + global demand shock + safe-haven flows): stagflation with declining output and rising inflation; gradual policy-rate increases toward long-run level stabilize inflation around 1 percent. - Policy recommendations from QIPF - Monetary policy primary but constrained by ELB (model ELB −1 percent). - FXI can complement NIRP under specific IPF use cases, with costs weighed against benefits. - Expansionary fiscal policy (automatic stabilizers and temporary discretionary measures consistent with debt brake) can shorten ELB duration and strengthen stabilization. - Maintain medium-term inflation expectations above bottom of PSR to preserve policy space. ### Long-term fiscal pressures and sustainability - Aggregate quantified long-term pressures - Total additional public debt by 2060 from aging and climate cited as 56 (percent of GDP) in Text Table 2 (aggregate). - Aging: - Annual expenditure on old-age and survivors’ pensions and disability benefits will rise by 1.4 percent of GDP by 2060 (staff analysis). - General government health expenditure will rise by 1.2 percent of GDP to 5.0 percent by 2060 (Federal Finance Administration estimate). - If unaddressed, commitments would raise public debt by around 48 percent of GDP by 2060. - Climate: - Climate mitigation policies to achieve net-zero could raise public debt in 2060 by 8–11 percent of GDP relative to reference scenario (Authorities’ 2024 Fiscal Sustainability Report). - Annex VI projections and assumptions (selected) - Life expectancy: 86 years for men and 89 years for women by 2060. - Old-age dependency ratio: 33 percent in 2025 → 46 percent in 2060. - Combined expenditure related to old-age, survivors’ and disability insurance projected 7.8 percent of GDP in 2024 → 9.3 percent by 2060. - Overall health expenditure projected 11.2 percent of GDP in 2023 → 15.3 percent by 2060; staff projects overall health expenditure increases to 14.6 percent by 2060 (staff projection note appears in text). - Staff estimates additional measures totaling 0.9 percent of GDP in 2032 needed to keep debt stable. - Fiscal strategy notes - With discretionary spending relatively small, revenue measures should be central to long-run sustainability. - VAT-related measures: - Standard VAT rate: 8.1 percent. - Proposed increases: 0.4 ppts. to finance 13th pension payment and 0.5 ppts. to finance defense spending; combined would raise revenues by CHF 4.3 billion. - Parliament approved VAT increase 0.4 percentage points to finance 13th payment from 2028; both VAT measures subject to referenda. - Amortization account: CHF 26 billion at end-2025; closing requires budget surpluses or extraordinary revenues (including portion of SNB profit distribution). ### Debt consolidation and medium-term debt projections (Section 5) - Public debt actual and projections (Percent of GDP unless otherwise indicated) - Actual public debt: 39.8 (2025). - Projected public debt: 2026: 39.4; 2027: 39.1; 2028: 38.5; 2029: 38.3; 2030: 37.6; 2031: 37.3; 2032: 36.9; 2033: 36.9; 2034: 36.8; 2035: 37.0. - Change in public debt (consecutive years): 2026: -0.5; 2027: -0.3; 2028: -0.4; 2029: -0.6; 2030: -0.1; 2031: -0.7; 2032: -0.3; 2033: -0.4; 2034: 0.0; 2035: -0.1; 2036: 0.2. - Primary deficit (percent of GDP): 2025: -0.2; 2026: 0.1; 2027: 0.2; 2028: 0.1; 2029: 0.3; 2030: 0.4; 2031: 0.5; 2032: 0.7; 2033: 0.8; 2034: 0.9; 2035: 1.0. - Gross financing needs (percent of GDP): 18.8 (2025); then 18.8, 18.6, 18.1, 18.7, 18.4, 18.5, 18.4, 17.6, 17.8, 17.7 across projection horizon. - Memo indicators: - Real GDP growth (percent): 1.5 (2025); 0.8 (2026); 1.5 (2027); 1.7 (2028); 1.5 (2029–2035 as shown). - Inflation (GDP deflator; percent): 0.2 (2025); 0.6 (2026); 0.6 (2027); 0.7 (2028–2035). - Effective interest rate (percent): 0.6 (2025); 0.6 (2026); 0.5 (2027); 0.5 (2028); 0.5 (2029); 0.6 (2030–2035). - Assessment: public debt projected to decline to 37 percent of GDP in 2031 from 40 percent in 2025 under staff baseline; overall sovereign stress risk: Low (near- and medium-term), Long-term risk: Moderate absent reforms. ### Selected supervisory, data, and regulatory implementation updates - Data and stress testing - Recommendation to introduce comprehensive data survey for insurers (first data collection as at 31 December 2024); liquidity stress test in development; pension fund data collection discussed between OPSC and FINMA. - Asset management survey: first comprehensive industry-wide survey carried out in 2025; now annual. - AML/CFT and beneficial ownership - Parliament adopted Beneficial Owners register and modification of AML Act on 26 September 2025; draft ordinances consulted 15 October 2025–30 January 2026; planned entry into force later this year. - FINMA conducted 113 onsite inspections of banks, 227 AML/CFT-related investigations, and initiated 12 enforcement proceedings in 2024. - Supervisory resourcing and powers - FINMA increased staff substantially in 2025; further steps planned. - TBTF package: FINMA will be able to impose fines against financial institutions; will be responsible for approving external regulatory auditors (will not oversee or pay them). - Macroprudential implementation - DSTI: self-regulation by the Swiss Banking Association in force and approved by FINMA; FINMA monitors application. - CCyB: cooperation between authorities being formalized; discussions on borrower-based instruments and positive neutral CCyB. - Financial safety net and crisis preparedness - ELF/ELF (Extended Liquidity Facility) process defined and testing underway; operation start slated for beginning of 2027. - Regular multi-agency crisis simulations being conducted under TBTF package. - Deposit Insurance Scheme (DIS) being further developed; TBTF package prepares for faster insured deposit payouts but does not adopt ex-ante DIA or use deposit insurance funds for resolution funding. ### Authorities’ positions (summarized) - Authorities broadly share staff’s assessment of outlook, risks, and external position. - Monetary policy - Authorities view monetary policy framework as appropriate; maintain flexibility. - Authorities see FXI as flexible and effective beyond ELB situations and consider NIRP could still be warranted in severe disinflationary shocks. - Authorities judged staff overestimated stimulus and underestimated costs of NIRP and underestimated benefits and overestimated costs of FXI. - Authorities do not engage in forward guidance and view SNB’s current definition of price stability and communication framework as effective. - TBTF and supervision - Authorities agreed G-SIBs should fully back foreign subsidiaries with CET1 capital but feel systemic risk is adequately managed and consider current macroprudential settings appropriate. - Authorities support strengthening FINMA’s powers, including limiting court suspension of its rulings, and point to ELF (2027) as reinforcing the safety net. - Authorities do not consider a dedicated macroprudential committee necessary. *International Monetary Fund — Switzerland: Selected chapter/section (2026).* ### 2. Status of TBTF Reform Implementation _______________________________________________________ 19 ### 2. Status of TBTF Reform Implementation ### Context: stability amid global volatility - Switzerland’s strong policy frameworks and highly flexible economy have helped it weather current global volatility. - In 2025, exports remained solid despite high and variable US tariffs and slow European trading partner growth. - The March 2026 energy price shock affected Switzerland less than neighbors thanks to lower fossil fuel dependence. - Global financial volatility has spurred safe-haven inflows and upward pressures on the franc, but the 2025 external position remained broadly in line with the level implied by medium-term fundamentals and desirable policies. - Inflation remains low, but has risen above recent zero readings, mostly due to higher energy prices. - Structural challenges highlighted: addressing Too-Big-to-Fail (TBTF) risks, improving supervisory framework, vigilance on systemic credit risk due to rising house prices and mortgage concentration, and medium-term fiscal challenges from aging, climate, and rising defense needs. ### Economic developments since the 2025 Article IV - Growth and inflation - Growth rose to 1.5 percent in 2025 (adjusted for international sporting events of Swiss-based institutions). - Growth slowed to 0.4 percent yoy in 2026:Q1. - Headline inflation: 1.1 percent in 2024 → 0.2 percent in 2025 → 0.5 percent in June 2026. - Core inflation: 0.3 percent (June 2026). - Short-term inflation expectations: 0.8–1.2 percent. - Long-term inflation expectations: around 1 percent. - Labor market - Unemployment rose to 3.0 percent. - Employment growth slowed to 0.2 percent yoy in 2026:Q1. - External and fiscal positions - Current account surplus: 6.4 percent of GDP in 2025. - SNB foreign reserves: CHF 711 billion at end-May. - Public debt: around 40 percent of GDP. - General government overall surplus narrowed to 0.3 percent of GDP in 2025 from 0.4 percent in 2024. - A 13th monthly pension payment approved by referendum will raise expenditure by 0.5 percent of GDP in 2026, financed mainly by drawing down pension fund assets (pension fund assets totaled CHF 55 billion at end-2024). ### Policy mix and financial system soundness - Monetary policy and SNB actions - Policy rate set at zero since June 2025. - SNB lowered minimum reserve threshold factor from 18.5 to 13.5 since November (remuneration reduced by 0.25 ppt on SNB deposits above level calculated from this factor). - SNB intervened modestly in 2026:Q1 to address appreciation pressures; FX interventions data published only starting 2020. - Fiscal stance - A modest fiscal expansion is underway; no supportive measures introduced in 2026 in response to higher energy prices since March. - VAT increases will keep the Confederation’s balance broadly unchanged; balance of social security funds expected to deteriorate over time. - Banking and NBFI strength - Aggregate Tier 1 regulatory capital ratio: above 20 percent (end-2025). - Liquidity coverage ratio (LCR): 175 percent at end-2025. - Non-mortgage credit: rebounded in 2026:H1 (up 6.7 percent yoy in April 2026) after shrinking FX loans led to a decline of 2.1 percent in 2025 (2001–2024 average: 1.7 percent). - Mortgage growth: 3.1 percent in 2025. - Owner-occupied housing prices rose by 4.5 percent (2025). - Pension funds: median yield of 5.5 percent in 2025. - FSAP (2025) found financial system highly resilient to an adverse scenario. - Regulatory and reform progress - SNB began publishing summaries of monetary policy discussions. - In line with 2025 FSAP recommendations, an Extended Liquidity Facility is planned. - Legislative proposals to strengthen FINMA’s crisis powers and address TBTF risks are planned. - “Bilaterals III” agreements with the EU were signed to support market access, energy security, and labor market outcomes. - Authorities introduced an action plan to reduce regulatory and administrative burdens and revised the Cartel Act to modernize merger control and enhance antitrust enforcement. ### Outlook and risks - External and domestic baseline assumptions - Baseline assumes weak trading-partner growth, heightened geopolitical uncertainty, commodity prices increasing substantially this year but receding gradually, and US tariffs on Switzerland set at 12.5 percent. - Monetary stance expected to remain unchanged in the short term. - Baseline projections (staff) - 2026 growth (adjusted for sporting events): 0.8 percent (1.1 percent non-adjusted). - Average inflation 2026: 0.6 percent. - 2027 growth (adjusted): 1.5 percent (1.2 percent non-adjusted). - Inflation: 0.6 percent in 2027 and 0.7 percent in 2028. - Growth should stabilize at potential rate 1.5 percent over medium term. - Downside risks - Risks tilted to the downside: further elevated geopolitical tensions, renewed spike in energy prices, additional US tariffs, entrenched trade barriers and fragmentation harming the export-oriented model. - Upside: lower energy prices and easing geopolitical tensions. - Policy response guidance - Low reliance on imported fossil fuels reduces inflation impact, but higher policy rates may still be necessary to contain inflation expectations in severe scenarios. - Automatic stabilizers should be allowed to function; extraordinary fiscal measures could be contemplated if needed to cushion growth and ease burden on monetary policy. ### Scenario analysis (selected numbers from Text Table 1) - Real GDP Growth (adj. for sporting events) - April WEO: 2026 = 1.0; 2027 = 1.6 - Baseline: 2026 = 0.8; 2027 = 1.5 - Adverse Scenario: 2026 = 0.7; 2027 = 1.3 - Severe Scenario: 2026 = 0.4; 2027 = 1.0 - Inflation - April WEO: 2026 = 0.5; 2027 = 0.5 - Baseline: 2026 = 0.6; 2027 = 0.6 - Adverse Scenario: 2026 = 1.1; 2027 = 0.7 - Severe Scenario: 2026 = 1.3; 2027 = 1.3 - Staff estimates of shock impacts - Adverse global downside scenario: higher commodity prices, weaker partner demand, and safe-haven flows could reduce Swiss real GDP by around 0.3 ppt. over two years compared to baseline; inflation would rise by around 0.5 ppt. in the first year and 0.1 ppt. in the second year. - Severe scenario: elevated commodity prices and tighter financial conditions could reduce real GDP by 0.9 ppt. over two years compared to baseline; inflation would rise by 0.7 ppt. in both the first and second years, compared to baseline. ### Authorities’ views - The authorities broadly shared staff’s assessment of the outlook, risks, and external position. - They agreed on moderate near-term growth, a slight slowdown in global activity and elevated geopolitical and tariff uncertainty, and a pickup as global demand gradually recovers. - At their June monetary policy assessment, the SNB expected inflation to rise slightly in the short term due to past energy price increases and higher foreign inflation, before declining again somewhat in the first half of the following year. *Source: IMF staff report excerpt — 2. Status of TBTF Reform Implementation* ### 2027. Inflation is expected to remain within the SNB’s range of price stability over the entire ### 2027. Inflation is expected to remain within the SNB’s range of price stability over the entire ### Inflation, external position, and measurement issues - Inflation is expected to remain within the SNB’s range of price stability (PSR) over the entire forecast horizon. - Switzerland’s current account surplus is warranted by fundamentals, but measurement issues related to statistical standards remain crucial to understanding the surplus. - Measurement issues, together with the trend appreciation of the Swiss franc, help explain the large discrepancy between the cumulated current account balances and the NIIP. - Authorities are undertaking ongoing efforts to better capture the activities of large multinational enterprises in BOP and IIP statistics. ### Policy discussions: strengthening long-term resilience (overview) - Discussions focused on using Switzerland’s strong policy frameworks to foster stability amid slowing growth, a volatile global environment, and rising long-term challenges. - With only a small output gap, fiscal policy under the debt brake is cyclically appropriate, but long-run expenditure needs present difficult tradeoffs. - Inflation remains within the SNB’s range, but monetary policy flexibility is limited by the current zero policy rate and costs of employing negative interest rates. - On the financial sector, authorities should continue to improve oversight, expand macroprudential policy tools, and build resilience against high systemic credit and TBTF risks in light of 2025 FSAP recommendations. - Structural reforms to enhance productivity and labor supply will broaden growth sources. - Measures to streamline pension and health systems and advance climate action may reduce fiscal strains and increase resilience. ### Fiscal policy: managing rising expenditure pressures - The small fiscal expansion in 2026 will help cushion the effects of higher energy prices and uncertainty. - The federal deficit will remain at 0.2 percent of GDP in 2026, as strong corporate income taxes, including Confederation proceeds from OECD Pillar 2 implementation, compensate for spending increases. - The pension increase will shift the general government overall balance into a deficit of 0.1 percent of GDP, for an overall deterioration of 0.4 percent of GDP (0.2 cyclically adjusted), partly compensating for the small negative output gap. - The medium-term component of the 2026 federal budget envisages rising expenditure; further consolidation will likely be needed for debt brake compliance despite Relief Package 27 reducing spending by 0.2 percent of GDP. - Planned VAT increases aim to cover higher pension and defense spending: - Parliament approved an increase in the VAT rate by 0.4 percentage points to finance the 13th monthly old-age pension payment from 2028; discussion of another VAT increase to finance defense spending is ongoing. - Both VAT measures are subject to referenda; alternative measures would be required should they not pass. - Winding down the balance of the amortization account (CHF 26 billion at end-2025) will be challenging absent policy actions; the account can only be closed via budget surpluses or extraordinary revenues (including a portion of SNB profit distribution). ### Long-term pressures: aging and climate (quantified) - Public debt is low and robust to shocks, but rising spending on pensions and health care along with climate mitigation costs could increase public debt by more than 56 percent of GDP by 2060. - Aging: - Staff analysis indicates annual expenditure on old-age and survivors’ pensions and disability benefits will rise by 1.4 percent of GDP by 2060. - The Federal Finance Administration estimates that general government health expenditure will rise by 1.2 percent of GDP to 5.0 percent by 2060, even after important reforms. - If unaddressed, these commitments would raise public debt by around 48 percent of GDP by 2060. - Climate: - Authorities’ 2024 Fiscal Sustainability Report suggests climate mitigation policies required to achieve net-zero objectives could raise public debt in 2060 by 8–11 percent of GDP relative to the reference scenario. - Costs could be higher if economic costs from climate change and adaptation spending are considered. - Text Table 2 summary (aggregate): Total additional debt by 2060 from long-term pressures totals 56 (percent of GDP). ### Fiscal strategy and numerical targets - With discretionary spending relatively small, revenue measures should be central to long-run sustainability. - Staff analysis suggests additional measures totaling 0.9 percent of GDP in 2032 (and potentially higher over time) will be needed to keep debt stable. - Much spending is mandated by law, limiting scope for expenditure cuts. - Staff estimates that the VAT rate would have to be raised slightly in 2032, and then annually thereafter to keep debt stable as expenditure rises, though base broadening or greater collection efficiency would reduce this. - Even with such measures, Switzerland would remain with a lower tax burden than many OECD peers. ### Authorities’ views on fiscal pressures - Authorities emphasized Switzerland's strong fiscal position and broadly agreed with staff's assessment of rising medium- and long-term spending pressures. - They stressed the debt brake continues to provide a credible and flexible fiscal anchor. - They expect budgetary pressures from the 13th monthly old-age pension payment and higher security spending to be covered within the debt brake via proposed VAT increases or compensatory spending cuts. - They highlighted Relief Package 27 and ongoing efforts to identify further savings to ensure continued compliance with the federal debt brake. - Looking further ahead, authorities share concerns on demographic change, security needs, and climate-related costs, and are assessing options to strengthen pension sustainability and reviewing spending responsibilities across government levels. - While viewing VAT increases as efficient and reliable, they remain open to a broader mix of revenue and expenditure measures. ### Box 1 — Ongoing tax reform initiatives (highlights and figures) - Individual taxation: - Approved by referendum in March; aims to make income tax civil-status neutral and will be implemented no later than 2032. - Shift to individual taxation is expected to reduce federal income tax revenue by CHF 0.6 billion but may boost female labor force participation. - Taxation of imputed rental value: - Approved by referendum in September 2025; will abolish taxation of imputed rental value from 2029, together with most related deductions including mortgage interest expenses and maintenance and renovation costs. - Cantons authorized to introduce a special property tax on second homes to offset revenue losses estimated at CHF 1.8 billion across all levels of government, assuming a mortgage rate at 1.5 percent. - VAT proposals and numbers: - Standard VAT rate as of the text is 8.1 percent. - Two proposals would raise the standard VAT rate by 0.4 ppts. to finance the 13th monthly old-age pension payment and by 0.5 ppts. to finance defense spending. - These would raise revenues by CHF 4.3 billion. - Earlier proposals to finance pensions envisaged raising the VAT rate in the range of 0.4–0.7 ppts. - Note: Given implementation uncertainty, the baseline does not include these tax reforms; proposed VAT increases are included from 2028. ### Monetary policy: stance, constraints, and tools - The current monetary policy stance is appropriate, but a volatile environment calls for keeping the door open to a return to either positive or negative policy rates. - With inflation expectations anchored well within the PSR and above actual inflation, the mildly expansionary stance is consistent with continued price stability. - Staff estimates the natural policy rate in a range of -0.5 to 0.3 in real terms (IMF, 2025). With the current real policy rate in the lower part of the range, this concurs with the SNB’s assessment of expansionary monetary policy. - Risks and constraints of negative interest rate policy (NIRP) based on the 2015–2022 experience: - Pass-through to funding costs weakened because “tiering” exempted some SNB deposits from negative rates; wholesale money market rates turned negative but most retail deposit rates did not fall below zero. - Lending pass-through was impaired due to incomplete adjustment of bank funding costs and banks’ reluctance to cut lending (particularly mortgage) rates. - Distortions grew as the policy rate was cut to -0.75 percent, potentially hitting an effective lower bound (ELB) beyond which further rate cuts would contract rather than stimulate credit. - Under negative interest rates, the exchange rate channel was significant: charges on SNB reserves reduced attractiveness of Swiss deposits as a safe haven, reducing downward price pressures from appreciation. - The investment channel in Switzerland is relatively weak as bank lending to companies is small compared to other European countries. - FX intervention (FXI) and limitations: - FXI can support monetary policy in some cases but has limits. Changes in the Swiss NEER are negatively correlated with changes in long-term inflation expectations, suggesting large safe-haven flows could destabilize inflation expectations. - The franc weakened in March following SNB announcements about greater willingness to engage in FXI; SNB undertook FX purchases during 2026:Q1. - FXI alone may be insufficient to counter sustained appreciation pressures given the deep FX market and the scale of purchases required. - FXI expands the SNB’s balance sheet and could lead to losses if the franc appreciates. - In the event of a severe disinflationary shock that could destabilize inflation expectations, staff’s modeling concurs that IPF-compliant FXI could be used as a complement to NIRP. - Policy recommendation on expectations: - The SNB should prevent inflation settling close to the bottom of the PSR (0–2 percent band). Maintaining expectations near the middle of the PSR is important because re-anchoring closer to zero would render monetary policy less effective and could raise financial stability risks. - Preventing re-anchoring could require a forceful response to sustained low inflation, including temporarily tolerating NIRP distortions and potentially employing exceptional fiscal policy provisions. - Clear communication—emphasizing willingness to maintain an accommodative stance for an extended period and to use IPF-compliant FXI—would be crucial. - SNB communications: - In line with 2025 Article IV recommendations, the SNB began publishing a summary of its monetary policy discussions in October 2025 (published four weeks after the decision). - The SNB could further enrich communications by using speeches and interviews to elaborate on its reaction function and assessment of risks and by providing more detail on projections and FXI. - Should the SNB return to negative policy rates, forward-looking communication will become particularly important. *International Monetary Fund — Switzerland: Selected chapter/section (2026).* ### 22. The authorities welcomed staff’s assessment that the monetary policy framework ### 22. The authorities welcomed staff’s assessment that the monetary policy framework ### Monetary policy framework and tools - The authorities agreed that the monetary policy framework "remains appropriate" and that monetary policy flexibility should be maintained. - The authorities view FXI as a flexible and effective tool that is not confined to situations where the policy rate is at the effective lower bound (ELB). - Low inflation was attributed to the SNB’s credible monetary policy and structural features of the Swiss economy; the current stance continues to have an expansionary effect. - In the event of a severe disinflationary shock, negative interest rate policy (NIRP) "could still be warranted". - Authorities judged that: - Staff overestimated the potential stimulus generated by negative interest rates while underestimating the costs of NIRP. - The transition from zero to negative rates was qualitatively different from monetary policy shifts above zero. - Staff underestimated the benefits and overestimated the cost of FXI, which authorities view as a targeted and flexible instrument to smooth short-lived safe-haven inflows at manageable costs. - Choice between FXI and negative interest rates depends on the source of the shock and on its persistence. - Authorities agreed with staff that inflation expectations should remain anchored within the price stability range. - Authorities noted they do not engage in forward guidance, and regarded the SNB’s current definition of price stability and communication framework as effective. ### Financial sector: systemic resilience — key findings - Systemic risk is assessed to be somewhat higher than last year. - Property-related loans account for 86 percent of bank lending. - One fifth of property-related loans are at variable rates that are sensitive to interest rate shifts. - Apartment prices are estimated at 15–40 percent above fundamental levels. - Residential investment segment: price increases driven by falling interest rates in 2025, with growth of 3.5 percent y/y in 2026:Q1. - Yields have become increasingly compressed, raising potential for fire sale defaults among limited liability firms. - Around 25 percent of pension fund assets and 37 percent of life insurer assets are in real estate. - Mortgages constitute 3 percent of pension fund assets and 9 percent of life insurer assets. - Sectoral countercyclical capital buffer is at its maximum level of 2.5 percent. ### Macroprudential recommendations and housing market measures - Establish a dedicated macroprudential committee, ideally chaired by the SNB, to address potential inaction bias and facilitate design of new macroprudential and systemic risk measures. - Tighten macroprudential policies to improve resilience: - Introduce a debt service-to-income (DSTI) limit, ideally phased in gradually and with an exempted loan quota. - Top up risk weights under Basel III Final capital rules to address affordability-related credit risks. - Streamline approvals and facilitate permitting to help housing supply and ease pressures. - Note: LTV caps set out in self-regulation appeared effective, but the share of loans not meeting FINMA’s affordability benchmarks is rising. ### Too-big-to-fail (TBTF) reform and supervisory powers - Components of the TBTF reform proposal are at different stages of consideration; the process appears likely to be long and its outcome uncertain. - Proposed improvements to FINMA’s powers could be strengthened by reducing the ability of legal appeals to suspend FINMA action. - Finalized capital rules for hard-to-value assets exclude Deferred Tax Assets (DTAs); including these DTAs would have reduced UBS CET1 capital by around US$7 billion. - The proposal requires that G-SIBs fully cover exposures of foreign subsidiaries with CET1 capital. ### Nonbank financial institutions (NBFIs) and other risks - NBFI risks are broadly contained, with long-term investors (life insurers and pension funds) accounting for a large share of NBFI assets. - Supervisors should remain vigilant about: - Interest and currency derivative exposure among insurers. - Potential liquidity mismatches. - Closing NBFIs’ data gaps. - Two mortgage bond institutions issue covered bonds jointly on behalf of member banks, collateralized by mortgages (one-sixth of the total stock); these raise potential house price contagion risk, though risks appear distant given prudent regulatory requirements and high collateral levels. - Rapid AI development has raised cyber risks, necessitating strengthened frameworks to contain them. ### Other reforms and safety-net enhancements - The SNB will open a new Extended Liquidity Facility (ELF) for banks in 2027, improving the safety net. - As noted in the FSAP, a public backstop would further strengthen confidence. - Supervisory intrusiveness could be improved by: - Increasing FINMA’s staff to ensure broader and more direct risk-based supervision. - Enabling FINMA to fully mandate, oversee, and pay for external regulatory audits, and reducing reliance on external regulatory auditors. *1cheea2026001 - 22. The authorities welcomed staff’s assessment that the monetary policy framework* ### Box 2. Switzerland: Status of TBTF Reform Implementation ### Box 2. Switzerland: Status of TBTF Reform Implementation ### Status of TBTF legislative reforms and timeline - Reforms proposed in June 2025 by the Federal Council are at various stages of the legislative approval process. - The legislative process is expected to be lengthy, with key measures unlikely to come into force before 2028. - Limited details are available on the concrete enhancements to FINMA’s powers. - Enhanced Early Intervention is currently put out for consultation: FINMA would gain stronger tools to intervene in bank management or reorganization processes at an earlier stage, before a crisis becomes critical. - A Senior Managers Regime currently put out for consultation would require banks with 250 or more employees to clearly define individual responsibilities, making it easier for FINMA to hold specific executives accountable for failures rather than the institution as a whole. ### Strengthened capital quality requirements (proposal details and impacts) - Proposal requires software assets to be phased out of capital over three years, in line with EU rules. - Estimated impact: reduce UBS’s CET1 capital by around US$4 billion. - Compliance will be phased in over a multi-year period. - Proposal requires that G-SIBs fully deduct the book value of foreign subsidiaries from parent-company CET1 capital. - As the only Swiss G-SIB, this proposal would raise UBS’s CET1 capital requirements by US$20 billion. - The reform would be gradual, beginning no earlier than 2028. ### AML/CFT and supervisory priorities - The authorities should strengthen AML/CFT risk-based supervision and implement related FSAP recommendations expeditiously. - FINMA should continue to develop supervisory activities targeting banks; a strong focus on AML/CFT supervision is needed to detect and sanction compliance deficiencies early and effectively. - Risk-based supervision should also include 'gatekeeper' professions (i.e., lawyers, notaries, and accountants), which were recently brought under the AML Act. - Enhancing monitoring of risks from cross-border activities and virtual assets remains important. - Authorities should ensure the timely implementation of recent AML/CFT reforms, including: - updated reporting requirements for legal entities; and - the operationalization of the beneficial ownership register. ### Authorities’ views on TBTF, systemic risk, and related measures - The authorities agreed that G-SIBs should fully back their foreign subsidiaries with CET1 capital but felt that current systemic-risk is adequately managed within current supervisory framework and macroprudential toolkit. - The authorities agreed with staff that systemic risks from the housing market remain elevated, but felt that current macroprudential settings are appropriate. - They agreed with staff that risks among NBFIs are contained. - The authorities pointed to the forthcoming Extended Liquidity Facility (2027) as further reinforcing the safety net. - They emphasized the importance of measures within the TBTF package currently before Parliament, including: - full coverage of G-SIBs’ foreign subsidiary exposures with CET1 capital; and - the public liquidity backstop. - The authorities supported strengthening FINMA’s powers, including limiting court suspension of its rulings. - While noting improvements to the framework for systemic risk oversight, they continued to feel a macroprudential committee as suggested by staff was not necessary. - In June, the Federal Council decided that these reforms will enter into force from October 2026. ### Staff appraisal and recommendations related to TBTF and financial resilience - The authorities’ commitment to strengthening Switzerland’s TBTF framework is welcome; passage and implementation should proceed. - The proposed requirement, consistent with FSAP recommendations, for G-SIBs to fully capitalize foreign subsidiaries with CET1 capital would materially strengthen resolvability and should not be diluted. - The introduction of the SNB’s Extended Liquidity Facility is welcome—establishment of a public liquidity backstop would further reinforce the crisis-management framework. - Continued efforts to strengthen FINMA’s resources, powers, and enforcement capabilities are equally important for ensuring effective supervision and the ability to act swiftly in the event of potential distress. - Additional efforts to strengthen financial system resilience recommended by staff include: - continued vigilance on vulnerabilities in residential real estate markets (elevated property valuations, compressed rental yields, pockets of weak borrower affordability); - further strengthening the macroprudential framework, including formalizing institutional arrangements and adding borrower-based measures to the available policy toolkit; - continued monitoring of risks arising from NBFIs, including insurers’ derivative exposures, data gaps, and evolving cross-border linkages, and potential spillovers through covered bond and other funding markets; - ongoing efforts to strengthen operational resilience, including in response to growing cyber threats; and - further improvements to AML/CFT risk-based supervision. *Source: Box 2. Switzerland: Status of TBTF Reform Implementation (excerpt).* ### Annex I. Banking Sector Concentration ### Annex I. Banking Sector Concentration ### Summary - The Swiss banking sector is dominated by a small group of large institutions, including several systemic banks, and concentration increased after UBS’s acquisition of Credit Suisse (CS). - Overall concentration remains comparable to peer countries and lending activity is less concentrated. - Mortgage markets remain competitive, with additional participation from insurers and pension funds targeting lower-risk borrowers. - Evidence suggests UBS’s acquisition of CS did not reduce overall credit supply or impair monetary policy transmission; some higher-risk and niche activities were scaled back but are of limited macroeconomic relevance. ### Banking sector structure and concentration - Sectoral assets totaled 360 percent of GDP at end-2025. - UBS, the only G-SIB domiciled in Switzerland, has assets larger than national GDP and accounts for 37 percent of system assets. - The three domestic SIBs (Zurich Cantonal Bank, Raiffeisen, and Post Finance) account for 19 percent of system assets. - Compared with other countries, the assets of Switzerland’s largest single bank are high relative to GDP, but concentration is lower when considering the assets of the three largest commercial banks relative to the total. ### Domestic lending and mortgage market - Domestic loans represent only 22 percent of UBS’s total assets. - UBS’s domestic credit market share almost doubled to around one-quarter at end-2023 following the acquisition of CS, though this declined as the combined bank scaled down its lending portfolio. - The lending market appears competitive; mortgage spreads between mortgage rates and long-term bonds are relatively narrow and comparable to other advanced economies. - Life insurers and pension funds underwrote 5 percent of the mortgages in 2024. - Share of mortgage stock held by NBFIs in 2024: insurers 2.7 percent; pension funds 2.5 percent. - NBFIs tend to focus on higher quality (lower LTV) loans, particularly owner-occupied, lower-risk residential properties in bigger cities; higher-risk lending is left to banks. ### Impact of UBS–Credit Suisse acquisition on credit supply and activities - The Herfindahl–Hirschman index for Swiss banks’ assets concentration rose from around 15 to more than 25 between 2022 and 2023. - SNB found no significant decline in provision of domestic credit after the acquisition; the decline in lending by UBS and CS was more than offset by domestically focused banks and aggregate domestic credit expanded. - Some niche sectors saw reductions in service provision: - Supply-chain finance (CS active pre-acquisition) was wound down post-acquisition. - Investment banking activities such as support for leveraged buyouts, US securitized products, and structured credit products fell. - CS’s private debt and direct lending infrastructure shrank, with other European lenders appearing to fill gaps. - These scaled-back areas were of limited importance to financing the domestic Swiss economy. ### Monetary policy transmission analysis (staff regression results) - Regression estimates measure pass-through from SARON to term and savings deposits and bank mortgage rates, comparing pre- and post-acquisition periods (Post-Acquisition dummy = 1 after July 2023). Regressions use monthly data from January 2008 and evaluate cumulative pass-through over a 12-month period with Newey-West standard errors. - Pre- and post-acquisition pass-through coefficients are not significantly different for mortgage rates or for any deposit rates up to one year after controlling for the impact of the negative interest rate policy (Negative Interest Rate Policy dummy = 1 during January 2015–September 2022). - Results are robust across pass-through horizons, across the distribution of interest rates, and across alternative sample periods; exceptions include strengthened pass-through for savings deposit rates of larger depositors and one-year time deposit rates. - Key coefficient estimates (cumulative 12-month pass-through, based on staff table): - β (overall interest rate pass-through): - Savings deposit rate: 0.195 - Time deposit rate, 1-month: 0.644 - Time deposit rate, 3-month: 0.728 - Time deposit rate, 6-month: 0.765 - Time deposit rate, 12-month: 0.794 - Variable mortgage rate: 0.084 - Fixed mortgage rate, 5-year: 0.569 - Fixed mortgage rate, 10-year: 0.409 - λ (impact of increasing banking sector concentration on pass-through): - Savings deposit rate: 0.221 - Time deposit rate, 1-month: 0.092 - Time deposit rate, 3-month: 0.026 - Time deposit rate, 6-month: -0.004 - Time deposit rate, 12-month: -0.081 - Variable mortgage rate: 0.054 - Fixed mortgage rate, 5-year: 0.133 - Fixed mortgage rate, 10-year: 0.234 - θ (impact of the negative interest rate policy on pass-through): - Savings deposit rate: 0.067 - Time deposit rate, 1-month: -0.222 - Time deposit rate, 3-month: -0.316 - Time deposit rate, 6-month: -0.385 - Time deposit rate, 12-month: -0.440 - Variable mortgage rate: 0.013 - Fixed mortgage rate, 5-year: -0.491 - Fixed mortgage rate, 10-year: -0.562 - Note: β captures overall pass-through, λ captures impact of increased banking sector concentration, and θ captures impact of negative interest rate policy. Numbers in bold in the source indicate statistical significance at 5 percent. ### Implications and risks - Increased concentration of the domestic credit market raises the challenge of reallocating a larger credit portfolio across the banking system in the event of further systemic distress. - Despite concentration increases, aggregate credit provision has remained robust and monetary policy transmission shows no clear weakening in the post-acquisition period per staff analysis. - Scaled-back higher-risk activities by UBS reduce certain vulnerabilities but had limited macroeconomic relevance for domestic financing. *Prepared by Romain Bouis and Phakawa Jeasakul. (Annex I. Banking Sector Concentration).* ### Annex III. Competitiveness and Resilience ### Annex III. Competitiveness and Resilience ### Exchange rate dynamics and recent appreciation - The Swiss franc has appreciated notably in recent years, reflecting low inflation relative to trading partners and increased safe-haven flows amid heightened global uncertainty. - Relative to 2025 average, the NEER in May 2026 has appreciated by 3.6 percent, and the REER by 1 percent. - Elevated trade and geopolitical tensions have strengthened safe-haven demand, contributing to appreciation in both nominal and real terms. - The pace of ongoing appreciation raises questions about sustaining competitiveness in tradable sectors. ### Export structure and resilience to exchange rate shifts - High value-added products such as chemicals and pharmaceuticals, clocks and watches, and machinery account together for over half of goods exports. - These high value-added sectors display relatively low exchange rate elasticities, helping cushion the impact of franc appreciation on external competitiveness and maintaining export resilience. - Factors supporting resilience: - Firms’ pricing power in high value-added sectors. - High import content of exports, providing a natural hedge through lower imported input costs. - Caveat: Persistent franc strength may still weigh on profitability and competitiveness over time. - Value of Top Trading Goods (Billions of Franc): - Other Exports: 53.0 - Optical and medical...: 17.4 - Machinery: 25.7 - Clocks and watches: 35.1 - Chemicals: 42.4 - Pharmaceutical products: 96.0 - Precious stones and metals: 119.1 ### Estimated exchange rate elasticities and empirical findings - Switzerland’s overall real exchange rate elasticity is estimated at around 0.65, below the cross-country average of 0.77. - Note: Elasticities are reported in absolute terms; an increase in the REER leads to a decrease in exports (elasticities would be negative without taking absolute values). - Sectoral elasticities (short run / long run) are reported in the source (see Hanslin Grossmann and others, 2016); summary statement: many high value-added sectors have lower elasticities relative to other sectors. - Export performance during large appreciation episodes (quarters in which the REER appreciates by one standard deviation above its mean), 2006–2025 — goods export growth: - Switzerland*: Appreciation Episodes -1.41% ; Other Episodes 1.23% - Canada: -1.37% ; 0.52% - Denmark: -2.18% ; 0.95% - Germany: -4.81% ; 0.86% - Italy: -5.46% ; 0.09% - Japan: -2.87% ; 2.93% - Netherlands: 0.11% ; 1.68% - New Zealand: 0.25% ; 1.22% - Source: IMF Staff Estimates. *Excluding valuables and merchanting. - Panel estimates linking changes in goods export volumes to ΔREERₜ and ΔForeignDemandₜ (annual goods export data 1980–2025). Coefficients (standard errors in parentheses): - Switzerland*: - ΔREERₜ: -0.413* (0.163) - ΔForeignDemandₜ: 1.555** (0.427) - Canada: - ΔREERₜ: -0.026 (0.253) - ΔForeignDemandₜ: 2.314** (0.606) - Denmark: - ΔREERₜ: -0.669** (0.216) - ΔForeignDemandₜ: 1.218** (0.402) - Germany: - ΔREERₜ: -0.486* (0.217) - ΔForeignDemandₜ: 2.220** (0.693) - Italy: - ΔREERₜ: -0.307** (0.092) - ΔForeignDemandₜ: 2.571*** (0.657) - Japan: - ΔREERₜ: 0.016 (0.113) - ΔForeignDemandₜ: 3.085*** (0.936) - Netherlands: - ΔREERₜ: -0.337 (0.187) - ΔForeignDemandₜ: 1.385* (0.634) - New Zealand: - ΔREERₜ: 0.038 (0.132) - ΔForeignDemandₜ: 0.780* (0.299) - Source: IMF Staff Estimates. *Excluding valuables and merchanting. - Key empirical takeaways: - Swiss exports have exhibited resilience during large appreciation episodes relative to several other advanced economies. - Changes in the REER are statistically significant for Switzerland and other countries (e.g., Germany, Italy, Denmark). - Trading partner demand is statistically significant across all countries in the sample and is an important driver of export performance. - Swiss exports respond less strongly to trading partner demand conditions than some other countries, consistent with the highly specialized nature of Swiss exports. ### Policy implications and recommendations - Given franc appreciation and safe-haven flows: - Monetary policy should remain flexible; the SNB’s toolkit (including negative policy rates and FXI) could be used to prevent the de-anchoring of inflation expectations. - Consider FXI if safe-haven capital inflows lead to the de-anchoring of inflation expectations. - To sustain competitiveness and resilience: - Encourage firms to diversify supply networks and adapt strategies to reduce vulnerability to trade disruptions. - Ensure supply of essential goods (e.g., food, energy) and strengthen energy security. - Expand and enhance cooperation with other countries/partners to diversify demand sources and preserve market access. - Support innovation and maintain an environment attractive to high value-added sectors to preserve pricing power and investment in R&D. - Monitor profitability and competitiveness in high value-added sectors, as persistent franc strength may weigh on margins over time. *Prepared by Ece Özge Emeksiz; source: Annex III. Competitiveness and Resilience (IMF staff analysis).* ### Annex V. Scenario Analysis Using the IMF’s QIPF Model ### Annex V. Scenario Analysis Using the IMF’s QIPF Model ### Overview and chief insights - The QIPF model examines how Switzerland can manage external shocks, including global negative demand shocks, safe-haven flows, and higher oil prices. - Effective macroeconomic stabilization requires a coordinated policy mix: monetary policy is primary but constrained by the effective lower bound (ELB); foreign exchange intervention (FXI) can complement negative interest rate policy by easing currency pressures and reducing effects on inflation and output; fiscal policy can shorten the period monetary policy is constrained by the ELB. - Maintaining inflation expectations above low levels is crucial for preserving policy space and improving macroeconomic outcomes. ### The Integrated Policy Framework (IPF) in the Swiss context - IPF evaluates monetary, exchange rate, macroprudential, and capital flow management policies together to identify best tools under diverse shocks and frictions. - IPF distinguishes ex ante (structural and macroprudential) and ex post (fiscal, monetary, complementary measures like FXI) responses, noting potential side effects and specific “use cases.” - Switzerland: de jure floating exchange rate, SNB target-range for inflation, strict fiscal rule and low public debt, no major external imbalances, unrestricted capital movements, deep FX markets — yet outsized safe-haven inflows can induce significant appreciation unwarranted by fundamentals. - Exchange-rate pass-through: cumulative pass-through of a 1-percent appreciation to headline inflation after one year is estimated at 0.12 percentage point in Switzerland, versus an average estimate of 0.05–0.08 percentage point for advanced economies. - Changes in the NEER are negatively correlated with changes in long-term inflation expectations (Correlation coeff.: -0.4071 (p-value: 0.0041)). ### QIPF model: characteristics, calibration, and limitations - Key model characteristics: - New Keynesian open-economy model calibrated for Switzerland; linearized version of Adrian et al. (2021) IPF model, following Chen et al. (2023). - Assumes FX traders have limited risk-bearing capacity (Gabaix and Maggiori, 2015), generating realistic exchange-rate volatility and enabling sterilized FX interventions to have real effects. - Calibration for Switzerland: - Model calibrated to current Swiss conditions: inflation and the policy rate at zero, long-run inflation of 1 percent, ELB set at −1 percent. - Implies gradual exchange-rate pass-through and reasonably well-anchored medium-term inflation expectations. - Limitations to note: - Assumes monetary transmission is not impaired when policy rates become negative; real-world NIRP effectiveness could be more modest. - Does not model potential adverse effects of NIRP on financial stability (bank earnings impairment, deposit stickiness). - Assumes FX market depth and premium distortions are known in real time; actual effectiveness of FXI may differ if markets are shallower or deeper than assumed. ### Scenarios simulated - Baseline model calibration assumptions and scenario inputs: - Inflation and policy rate at zero, long-run inflation 1 percent, ELB −1 percent. - Negative global demand shock calibrated to 2008–09 GFC decline in Swiss GDP. - Oil prices are assumed to double over two years, and global output to decline twice as much as in the April 2026 WEO baseline. - Scenario 1 — Severe global demand and UIP premium shock: - A negative global demand shock reduces Swiss GDP by 3 percent and inflation by 1 percent points. - Safe-haven inflows add appreciation pressures, lowering the UIP premium and amplifying output contraction and disinflation. - Under the demand shock alone the policy rate stays at the ELB for six quarters; when combined with safe-haven flows the policy rate stays at the ELB for about ten quarters. - Combined shock: output losses increase to 3.7 percent and inflation falls to about −2.6 percent due to franc appreciation. - FXI can reduce time at the ELB, dampen GDP contraction and inflation decline, and help re-anchor inflation expectations (Use Case C), but required FX purchases are substantial given deep markets and carry balance-sheet risks. - The analysis considers an increase in FXI of 11 percent of GDP; larger FXI could deliver further stabilization gains. - Scenario 1 — Role of fiscal policy: - Expansionary fiscal policy (expenditure-based stimulus or temporary relaxation of the debt brake in severe shocks) dampens negative effects on GDP and prices, speeds normalization of the policy rate, and complements IPF-consistent FXI (FXI should not substitute for warranted fiscal adjustment). - Scenario 2 — Inflation expectations anchored at a very low level: - Current short-term inflation expectations are around 0.7 percent; risk exists of expectations falling closer to zero. - When long-run inflation is close to zero (vs. the 1-percent baseline), the same shock yields a sharper REER appreciation, larger output contraction, and more pronounced deflationary pressures. - Policy constraints intensify: the policy rate must remain at the ELB for 16 quarters (versus 10 quarters in the comparable scenario with higher long-run inflation). - FXI at the ELB can help re-anchor inflation expectations, lift expectations, and expand monetary policy space. - Scenario 3 — Oil price shock combined with global negative demand and safe-haven flows (severe global stagflation): - A sharp increase in oil prices combined with a decline in global demand creates stagflation: declining output and rising inflation. - If combined with safe-haven inflows and franc appreciation, inflationary pressures are eased and output weakens further. - In this context, gradual policy-rate increases toward the long-run level stabilize inflation around 1 percent; substantially stronger tightening would be needed if the energy shock did not trigger safe-haven inflows. ### Policy implications and recommendations - Monetary policy remains the primary stabilization tool, but its effectiveness is constrained by the ELB (model ELB is −1 percent). - FXI can complement negative interest rate policy by mitigating appreciation pressures, shortening ELB duration, and supporting inflation expectations — appropriate under specific IPF use cases and when costs are assessed as reasonably low. - Expansionary fiscal policy (automatic stabilizers and, in severe cases, temporary discretionary measures consistent with the debt brake framework) can reduce the duration of the ELB and strengthen stabilization. - Maintaining medium-term inflation expectations above the bottom of the SNB’s 0–2 percent price stability range (PSR) preserves monetary policy space and improves macroeconomic outcomes. - Benefits of FXI must be weighed against potential costs: sizeable required intervention in deep markets, central bank balance-sheet losses from sustained FX purchases, and risks to the nominal anchor from repeated interventions. *Prepared by Romain Bouis, Ece Özge Emeksiz (EUR), Marcin Kolasa, and Ruy Lama (MCM).* ### References ### References ### Bibliographic references - Adrian, T., C. Erceg, M Kolasa, J. Linde, and P. Zabczyk. 2021. “A Quantitative Microfounded Model for the Integrated Policy Framework.” IMF Working Paper No. 21/292, International Monetary Fund, Washington DC. - Basu, S., E. Boz, G. Gopinath, F. Roch, F. Unsal. 2020. "A Conceptual Model for the Integrated Policy Framework," IMF Working Papers 2020/121, International Monetary Fund, Washington DC. - Carrière-Swallow, Y., B. Gruss, N. Magud, and F. Valencia. 2023. “State-Dependent Exchange Rate Pass-Through.” Journal of International Money and Finance 132: 102805. - Casiraghi, M. R. Meeks, G. Kamber, L. Brandao Marques, and G. Gelos. 2021. “Negative Interest Rates: Taking Stock of the Experience So Far.” International Monetary Fund Departmental Papers No. 3. - Chen, K., M. Kolasa, J. Linde, H. Wang, P. Zabczyk, and J. Zhou, 2023. “An Estimated DSGE Model for Integrated Policy Analysis.” IMF Working Paper No. 23/135, International Monetary Fund, Washington DC. - Cwik, Tobias and Christoph Winter. 2024. “FX interventions as a Form of Unconventional Monetary Policy.” SNB Working Papers 4. Swiss National Bank. Zurich. - Erikson, H. and D. Vestin. 2021. “Pass-through of negative policy rates.” Sveriges Riksbank. Economic Commentary No. 9. - Gabaix, X., and M. Maggiori, 2015. “International Liquidity and Exchange Rate Dynamics.” Quarterly Journal of Economics, Vol. 130, No. 3, pp. 1369–1420. - IMF. 2023. “Integrated Policy Framework – Principles for the Use of Foreign Exchange Intervention.” IMF Policy Paper No. 2023/061, International Monetary Fund, Washington DC. - IMF. 2024. Switzerland: Selected Issues. IMF Staff Country Report No. 24/180. International Monetary Fund, Washington, DC. - IMF. 2020. “Toward and Integrated Policy Framework.” IMF Policy Paper No. 2020/046, International Monetary Fund, Washington DC. - Jašová, M., R. Moessner, and E. Takáts. 2019. “Exchange Rate Pass-Through: What Has Changed Since the Crisis?” International Journal of Central Banking 15 (3): 27–58. - Colombier, Carsten, Benjamin Lerch, and Thomas Brändle, 2026. “Healthcare Expenditures Projections for Switzerland up to 2060: Aging and Reforms”, FFA Working Paper No. 29. - Federal Department of Finance, 2024. “2024 Fiscal Sustainability Report for Switzerland: Aging and Net Zero Target”. Federal Department of Finance. April, Berne. ### Annex VI — Long-Term Fiscal Pressures: Key findings - Main drivers: - Population ageing, health care demands, and climate transition. - Life expectancy projected to reach 86 years for men and 89 years for women by 2060. - Old-age dependency ratio projected to rise from 33 percent in 2025 to 46 percent in 2060. - Aggregate fiscal pressure summary: - Combined expenditure related to old-age, survivors’ and disability insurance and associated supplementary benefits projected to rise from 7.8 percent of GDP in 2024 to 9.3 percent by 2060. - Taken together (social protection and health), trends will raise public debt by around 21 percent of GDP by 2060 (social protection component). - Overall health expenditure projected to rise from 11.2 percent of GDP in 2023 to 15.3 percent by 2060. - Rising health spending could increase public debt by roughly 27 percent of GDP by 2060 (health component). ### Fiscal pressures from social protection spending: findings and projections - Old-age and survivors’ pension system: - Net assets of CHF 55 billion at end‑2024. - System operating balance projected to deteriorate sharply from 2026 due to the planned 13th monthly old-age pension. - Pension spending projected to rise from 6.0 to 7.4 percent of GDP by 2060. - Net assets projected to be depleted by mid-2040s. - The 13th monthly pension payment costs about 0.5 percent of GDP. - Parliamentary-approved VAT increase of 0.4 percentage points from 2028 would raise additional revenue of about 0.2 percent of GDP and would only partly finance the 13th payment. - Disability insurance: - Net liabilities of CHF 6 billion at end‑2024. - Spending projected to remain stable at around 1.1 percent of GDP through 2060. - Structural deficits expected due to rising disability levels related to mental health. - Supplementary benefits: - Projected to increase modestly and stabilize around 0.8 percent of GDP. - Increase largely driven by rising old‑age and survivors’ pensions. - Distribution of fiscal burden and debt implications: - Direct Confederation spending projected to rise by around 0.3 ppts. of GDP (adding around 11 percent of GDP in debt). - Pension scheme projected to accumulate additional debt of about 9 percent of GDP by 2060, assumed to be the Confederation’s responsibility. - Canton expenditure would remain broadly stable. ### Fiscal pressures from health care spending: findings and projections - Drivers of higher health expenditure: - Aging, rising incomes, medical technology advances, and Baumol-type cost pressures. - Projections: - Overall health expenditure projected to rise from 11.2 percent of GDP in 2023 to 15.3 percent by 2060. - About two‑thirds of the increase expected to be borne by households through higher premiums, out‑of‑pocket payments, and cost sharing; remainder falls on the public sector, largely at the cantonal level. - Government health expenditure projected to rise from 3.5 to 5.0 percent of GDP. - Staff projects overall health expenditure increases to 14.6 percent of GDP by 2060 (staff projection note appears in text). - Rising government health expenditure could contribute to a significant increase in public debt, especially for cantons; staff estimates a rise in public debt from health spending of roughly 27 percent of GDP by 2060. ### Fiscal pressures from climate mitigation: scenarios and impacts - Baseline and necessity: - Reference scenario (no additional policy changes) projects remaining emissions of nearly 30 million tons of CO2-equivalent in 2050. - Further climate mitigation required to achieve net-zero emissions by 2050. - Alternative policy scenarios: - Four policy scenarios combine mixes of higher carbon prices (CO2 levy), stricter emissions standards, utilization of carbon capture, and targeted subsidies for negative emissions technology and carbon capture storage. - In all scenarios, new taxes on electric vehicles are introduced to offset revenue losses from the mineral oil tax and the performance-related heavy vehicle charge. - Macroeconomic and fiscal impacts: - Climate mitigation policies required to achieve net-zero are projected to weigh on economic activity: real GDP estimated to be around 2.5 percent lower in the long term relative to the reference scenario. - Both government revenue and expenditure decline, with a stronger reduction on the revenue side. - Projected increase in public debt of about 8–11 percent of GDP by 2060 from mitigation measures. - Total fiscal impact likely larger once economic costs from climate change in the reference scenario and additional government spending for climate adaptation are included. ### Key demographic, macroeconomic and health expenditure assumptions (Table VI.2) - Long-term labor productivity growth: 1.15percent - Long-term inflation rate: Consumer prices: 1.00percent - Long-term inflation rate: GDP deflator: 1.00percent - Long-term government funding costs: 2.20percent - Real GDP growth: Based on working-age population growth - Employment growth: Based on working-age population growth - Economy-wide real wage growth: Based on labor productivity growth - Income elasticity for health expenditure: - Outpatient care: 1.2; Inpatient care: 1.0 - Wage elasticity for health expenditure 1/: - Outpatient care: 0.5; Inpatient care: 0.25; Long-term care: 0.75 - Morbidity 2/: 0.50 - Notes: - 1/ Elasticity interpretation: For the elasticity value of X, a 1-percent increase in economy-wide real wage would increase real health expenditure by X percent. - 2/ Morbidity parameter: the value 0.5 means that the health condition would deteriorate by half a year for each one-year increase in life expectancy. ### Annex VII — Debt sustainability and risk assessment: key points - Overall risk of sovereign stress: Low. - Near-term: not applicable for disbursing IMF arrangements; in surveillance the near-term assessment is performed but not published. - Medium-term risk: Low; mechanical signs and staff assessment align; fiscal rules underpin falling public debt trend as staff baseline assumes additional tax revenue to meet debt-brake requirements. - Long-term risk: Moderate; absent additional pension and health care reforms, public debt expected to rise notably in the long run due to population aging and climate change. - DSA summary commentary: - Public debt projected to decline to 37 percent of GDP in 2031 from 40 percent of GDP in 2025 under staff baseline. - Despite rising expenditure on pensions and defense in the medium term, staff baseline assumes additional tax revenue to meet debt brake requirements. - Long-run additional public debt expected from aging and climate change underscores importance of pension and health care reforms and revenue-enhancing measures. - With an effective fiscal anchor (debt brake rule) and room to raise taxes, authorities expected to raise additional revenue to meet higher long-term spending needs, contributing to a low overall risk. *Source: Fund staff.* ### 5. Debt consolidation across sectors: ### 5. Debt consolidation across sectors ### Debt coverage and valuation - Debt coverage: general government; consolidated basis used, but data on intra-government debt holdings are not publicly available. - Central government (Confederation) accounts for about 55 percent of total debt. - Government financial assets: holding a significant amount of financial assets, mostly in company shares, (54 percent of GDP). - Valuation definitions provided: - Nominal value: amount the debtor owes at any moment in time (includes transactions, exchange rate, and other valuation changes other than market price changes and other volume changes). - Face value: undiscounted amount of principal to be paid at (or before) maturity. - Market value: value as if acquired in market transactions on the balance sheet reporting date (only traded debt securities have observed market values). ### Public debt structure (key indicators) - Debt is predominantly in domestic currency. - Non-marketable debt instruments are substantial: accounts payable amount to slightly more than one-third of total debt. - Central government funding instruments: mainly money market debt and bonds. - Local governments (cantons and communes): issue bonds and take loans from financial institutions. - Debt securities account for about 40 percent of total debt. - Average remaining maturity (debt securities): estimated at around 10.8 years. - Residual maturity (aggregate): 5.5 years. - Debt by currency and holder: perimeter shown is general government. ### Baseline scenario projections (Percent of GDP unless otherwise indicated) - Actual public debt: 39.8 (2025) - Projected public debt: - 2026: 39.4 - 2027: 39.1 - 2028: 38.5 - 2029: 38.3 - 2030: 37.6 - 2031: 37.3 - 2032: 36.9 - 2033: 36.9 - 2034: 36.8 - 2035: 37.0 - Change in public debt (consecutive years): - 2026: -0.5 - 2027: -0.3 - 2028: -0.4 - 2029: -0.6 - 2030: -0.1 - 2031: -0.7 - 2032: -0.3 - 2033: -0.4 - 2034: 0.0 - 2035: -0.1 - 2036: 0.2 - Contribution of identified flows (percent of GDP): - 2026: 0.5 - 2027: -0.2 - 2028: -0.5 - 2029: -0.5 - 2030: -0.2 - 2031: -0.6 - 2032: -0.4 - 2033: -0.3 - 2034: -0.1 - 2035: 0.0 - 2036: 0.1 - Primary deficit (percent of GDP): - 2025: -0.2 - 2026: 0.1 - 2027: 0.2 - 2028: 0.1 - 2029: 0.3 - 2030: 0.4 - 2031: 0.5 - 2032: 0.7 - 2033: 0.8 - 2034: 0.9 - 2035: 1.0 - Noninterest revenues (percent of GDP): range from 32.6 (2025) increasing gradually to 34.0 (2035). - Noninterest expenditures (percent of GDP): range from 32.4 (2025) increasing gradually to 35.0 (2035). - Automatic debt dynamics (percent of GDP): roughly -0.4 to -0.6 across projection years (e.g., 2026: -0.4; 2035: -0.6). - Real interest rate and relative inflation components: - Real interest rate (percent): 0.2 (2025); 0.0 (2026); 0.0 (2027); -0.1 (2028); 0.0 (2029); -0.1 (2030–2035) as shown. - Relative inflation: 0.0 across projection horizon. - Real growth rate (percent): -0.6 (2025), -0.3 (2026), then -0.6 persistently from 2027 onward (shown as -0.6). - Other identified flows (percent of GDP): 1.2 (2025); 0.0 (2026); -0.1 (2027); 0.1 (2028); 0.1 (2029); -0.3 (2030); -0.3 (2031); -0.3 (2032); -0.3 (2033); -0.3 (2034); -0.3 (2035). - Interest revenues (minus) (percent of GDP): -0.3 constant across projection years. - Other transactions (percent of GDP): 1.4 (2025); 0.3 (2026); 0.2 (2027); 0.4 (2028); 0.4 (2029); 0.0 (2030–2035). - Contribution of residual (percent of GDP): -1.0 (2025); -0.1 (2026); 0.1 (2027); -0.1 (2028); 0.1 (2029); -0.1 (2030); 0.1 (2031); -0.1 (2032); 0.1 (2033); -0.1 (2034); 0.1 (2035). - Gross financing needs (percent of GDP): 18.8 (2025) and then 18.8, 18.6, 18.1, 18.7, 18.4, 18.5, 18.4, 17.6, 17.8, 17.7 across the projection horizon. - Of which: debt service series shown (e.g., 19.3 for 2025; 18.9 for 2026; 18.7 for 2027; etc.) - Local currency debt service mirrors debt service figures; foreign currency debt service shown as 0.0 across horizon. - Memo indicators: - Real GDP growth (percent): 1.5 (2025); 0.8 (2026); 1.5 (2027); 1.7 (2028); 1.5 (2029–2035 as shown). - Inflation (GDP deflator; percent): 0.2 (2025); 0.6 (2026); 0.6 (2027); 0.7 (2028–2035 as shown). - Nominal GDP growth (percent): 1.6 (2025); 1.7 (2026); 1.8 (2027); 2.6 (2028); 1.9 (2029); 2.6 (2030); 2.0 (2031); 2.6 (2032); 2.0 (2033); 2.6 (2034); 2.0 (2035). - Effective interest rate (percent): 0.6 (2025); 0.6 (2026); 0.5 (2027); 0.5 (2028); 0.5 (2029); 0.6 (2030); 0.6 (2031); 0.6 (2032); 0.6 (2033); 0.6 (2034); 0.6 (2035). Commentary on projections: - Public debt is projected to decline relative to GDP over the medium term as national and local fiscal rules, notably debt brake requirements, prevent governments from running structural deficits. - Staff assumes additional tax revenues will be raised to cover higher spending on defense, social protection and health in the medium-term baseline. - Extended projection reflects rising long-term expenditure pressures due to population aging and climate transition. ### Medium-term risk analysis and financeability - Residual maturity: 5.5 years. - Debt fanchart and GFN financeability modules signal low risk: - Debt fanchart index (DFI): 0.7 (risk signal: 3/Low). - Fanchart width: 18.2 (percent of GDP) with contribution 0.3. - Probability of debt non-stabilization: 3.4 (percent) with contribution 0.4. - Terminal debt-to-GDP institutions index: x3.1 with contribution 0.1. - Average baseline gross financing needs (GFN): 18.5 (percent of GDP) with contribution 6.3. - Initial banks' claims on the general government (pct bank assets): 2.9 with contribution 0.9. - Change in banks' claims in stress (pct banks' assets): 0.1 with contribution 0.0. - GFN financeability index (GFI): 7.3 (risk signal: 4/Low). - Medium-term index: combines DFI (0.7) and GFI (7.3) to yield an overall low risk signal (final assessment: Prob. of missed crisis, 2026-2031, if stress not predicted: 0.0 pct.; Prob. of false alarms, 2026-2031, if stress predicted: 71.6 pct.). - Commentary: Low risk reflects falling public debt trend and limited reliance on banks to meet government financing needs. Large gross financing needs reflect sizeable accounts payable, which have been stable and should continue to be rolled over smoothly. ### Annex VIII — Safe-haven flows in Switzerland (key findings) - Safe-haven properties: Over past decades, the US dollar, Japanese yen, and Swiss franc have exhibited safe-haven properties, appreciating during global risk-off episodes. - Historical episodes: Switzerland experienced two episodes of sizable safe-haven inflows—during the euro area debt crisis and the COVID-19 pandemic. - Intermediation channel: - Unlike the US and Japan where inflows go into large government debt markets (US$35 trillion and US$9 trillion respectively), Switzerland’s market (US$150 billion) is small and less liquid. - Safe-haven demand for the franc has traditionally materialized as increases in bank deposits, notably at Swiss banks’ overseas offices. - Empirical correlations: - Over the past two decades, the dollar, yen, and franc show negative correlations with risk assets (e.g., positive correlations with the VIX and gold prices; negative with equity prices), indicating investor purchases during risk-off episodes. - Correlations between government bond yields and global risk factors have weakened since 2020, falling near zero across most advanced economies. - Historical deposit accumulation: During the euro area debt crisis nonresidents accumulated CHF 132 billion via Swiss bank accounts, of which CHF 78 billion were acquired through Swiss branch offices of foreign-domiciled international banks; nonresidents also increased holdings of franc-denominated bonds and stocks by CHF 42 billion. - SNB interventions: - SNB interventions have been used in some cases to moderate exchange rate appreciation and domestic financial market volatility by buying FX with francs; interventions were notable during the euro area debt crisis and the COVID-19 pandemic. - These interventions converted nonresident franc-denominated deposits into SNB sight deposits backed by international reserves, partly insulating the Swiss financial system. - Post-2024/2025 dynamics: - The situation changed in 2025: relatively high US interest rates raised funding costs and falling Swiss policy rates reduced the attractiveness of flows into Switzerland; dollar weakness also reduced the franc’s relative appeal. - Resulting smaller safe-haven inflows and more limited franc appreciation have reduced SNB interventions. - However, more limited interventions may trigger greater financial market volatility; responsiveness of Swiss money market rates to global risk measures has increased. - Safe-haven inflows could reduce bank funding costs and boost bank lending, potentially raising domestic financial asset prices. - Financial stability: Despite past inflows, financial stability risks have been contained—larger bank deposits induced by safe-haven demand were placed as SNB deposits rather than intermediated into risky investments; reversals in safe-haven demand can generally be managed without financial stress. - Market functioning: Franc exchange market functioning has been broadly orderly; implied returns from hedged positions involving the franc have been small and stable compared with other major currency pairs. *Source: IMF staff estimates and projections, Switzerland: Debt consolidation across sectors.* ### References ### References ### Annex IX. Effects of Low Inflation — Overview - Since the adoption in January 2000 of the current 0-2 percent price stability range (PSR), Swiss inflation has persistently remained very low; during January 2000–January 2026, annual inflation was below one percent around two-thirds of the time. - Prolonged low inflation and the introduction of negative interest rates in other currency areas encouraged the use of negative interest rates in Switzerland, with important macrofinancial implications. ### Major macrofinancial consequences (enumerated findings) - Lower-for-longer interest rates, including NIRP, can support mortgage growth and house price appreciation, increasing systemic risks. - Policy rate cuts are transmitted—albeit imperfectly—to mortgage rates, lowering borrowing costs and increasing mortgage expansion and real house price appreciation, especially among domestically focused banks (citations in source). - With real estate supply constrained, lower interest rates are largely capitalized into higher prices rather than new construction, exacerbating valuation pressures over time. - Low interest rates compress banks’ net interest margins (NIMs) and profitability (ROA). - A large literature finds NIMs depend positively on the interest rate because passthrough to deposit rates is lower than to loan rates. - Although low rates reduce loan losses and support ROA, the net effect on banks’ profitability is negative on average (citation: Bouis et al., 2025). - Lower profitability reduces banks’ capacity to build capital buffers through retained earnings, with implications for financial stability in the long term. - Swiss banks’ NIM and ROA were negatively impacted by prolonged low interest rates over 2009–2021; they were supported by higher rates from mid-2023, then rates decreased from mid-2024 as the SNB gradually cut its policy rate towards zero. - Constrained monetary policy space near the effective lower bound (ELB) weakens policy effectiveness, especially during adverse shocks. - QIPF model simulations show that when long-run inflation is anchored close to zero instead of one percent, policy responses are less effective. - An adverse scenario combining a negative demand shock with safe-haven inflows leads to a stronger real exchange rate appreciation, a deeper output contraction, and more pronounced deflationary pressures, because the policy rate must spend more time at the ELB of -1 percent when inflation is anchored at a lower level. - The existence of the ELB thus implies monetary policy space is less constrained when inflation expectations are anchored well above zero. - Operational and behavioral adjustments by banks in response to low rates: - Pass-through to deposit rates is limited, compressing net interest margins. - Banks shift toward fee income, longer maturities, and mortgage lending. - Lower profitability can lead banks to loosen lending standards and take on more risk. ### Quantitative and technical points (preserve original numeric expressions) - PSR defined as "0-2 percent". - Time window referenced: "January 2000–January 2026". - Inflation below one percent "around two-thirds of the time". - ELB in the QIPF model is set to "-1 percent". - Historical period of bank profitability impact: "2009–2021". - Policy rate movements: support from "mid-2023"; decrease from "mid-2024". ### References cited within the Annex (selected works referenced in the text) - Danton and Jokipii, 2024. - Lambertini and Wu, 2020. - Athias and others, 2025. - Swiss Bankers Association, 2019. - Borio et al., 2017. - Bouis et al., 2025. - Arteta, C., M. A. Kose, M. Stocker, and T. Taskin. 2016. - Schelling, T., and P. Towbin, 2022. *Source: References (1cheea2026001).* ### introduction of acomprehensive data survey as part ### introduction of acomprehensive data survey as part ### Data collection, modeling, and pensions - Recommendation: introduction of a comprehensive data survey as part of the implementation of the Prudent Person Principle for Swiss insurance companies (first data collection as at 31 December 2024) to expand available data, e.g., corresponding exposure data per counterparty. - Recommendation 2: Enhance the solvency stress test model (including risks relevant for asset managers, micro data on households and firms); develop a liquidity stress test model. - Update: Targeted improvements and exploratory analyses using microdata are underway; data availability is a limiting factor (e.g. loan-level data). - Update: A liquidity stress test is currently under development. - Recommendation 3: Develop a dataset and regularly collect data on pension funds to enable market-wide horizontal and systemic risk analyses. - Update: Discussed between the Occupational Pension Supervisory Commission (OPSC) and FINMA. OPSC continues efforts to improve data availability in the second pillar but currently lacks an explicit legal basis to collect data from pension funds. FINMA can provide limited direct support through access to insurer data. ### Cross-cutting financial regulation and supervision - Recommendation 4: Exempt FINMA’s supervisory measures from automatic suspension in the event of legal appeals and introduce FINMA’s power to levy fines on institutions and individuals. - Update: Federal Council measures on 10 April 2024 propose removing suspensive effect of appeals in a targeted manner for all banks. Under the TBTF package FINMA will be able to impose fines against all financial institutions, not against individuals. Most measures under the TBTF package are unlikely to come into force before 2028. - Recommendation 5: Enable FINMA to issue binding prudential standards in all necessary areas and to provide clear supervisory expectations through circulars. - Update: Prudential standards are primarily determined in laws of the Parliament and ordinances of the Federal Council. FINMA can already issue binding regulation in the form of FINMA ordinances where delegated, and can use circulars to explain application of legislation. ### Resourcing and supervisory tools - Recommendation 6: Increase FINMA’s supervisory staff and improve the breadth, depth, and intensity of direct risk-based supervision, including on conduct, fintech, cyber risk and AML/CFT. - Update: In the year 2025 FINMA has increased the number of staff substantially to improve intensity of direct risk-based supervision. Further steps are planned. - Recommendation 7: Enable FINMA to fully mandate, oversee, and pay for external regulatory auditors, and reduce reliance on external regulatory auditors. - Update: Under the TBTF package FINMA will be responsible for approving external regulatory auditors, but will not oversee or pay them. Reliance on external auditors should be reduced by reinforcing FINMA’s own supervisory capacity, including removing restrictions on onsite audits. ### Banks (early intervention, governance, Pillar 2) - Recommendation 8: Expand and strengthen FINMA’s legal powers (to all banks) in early intervention, onsite examinations, Pillar 2 capital add-ons, governance failures; introduce a Senior Manager’s Regime applicable to all banks. - Update: Early intervention options for all banks will be strengthened with the TBTF package. Restrictions on onsite audits will be removed. A Senior Manager Regime will be introduced to assign responsibilities and link to possible sanctions. Planned improvements in FINMA competence to set Pillar II add-ons (Adjustment in the Capital Adequacy Ordinance). ### Securities markets, asset management, and market abuse - Recommendation 9: Improve market monitoring and reporting, plugging significant data gaps in both asset management and secondary markets. - Update: In 2025, the first comprehensive financial-industry-wide survey on asset management was carried out; this industry-wide asset management data collection is now carried out annually and substantially expands available data. In 2025 FINMA began analyzing trading-related data of the main secondary market trading facilities. Further improvements planned for 2026. - Recommendation 10: Enhance the mechanisms to prevent, detect, and enforce market abuse. - Update: Following review, amendments to the Financial Market Infrastructure Act (including rules to prevent market abuse) were submitted to public consultation. Submission of draft legislation to parliament is forthcoming. ### Insurance and pension funds supervision - Recommendation 11: Provide cantonal supervisors with authority and instruments to intervene. - Update: In 2025 the FDHA held discussions on priorities for reforms of the LOB and tasked the FSIO to continue discussions and submit a discussion paper to the Federal Council by the end of 2026. Reviewing supervisory instruments is part of this process. - Recommendation 12: Strengthen suitability review for insurers to cover all the heads of control functions. - Update: Initial analysis completed; decision on how to proceed not yet taken. - Recommendation 13: Implement recovery planning for all internationally active insurance groups (IAIGs) and designated non-IAIGs; implement resolution planning for IAIGs, as applicable. - Update: In 2025 FINMA developed a revised implementation guidance for insurance recovery plans. All IAIGs and designated non-IAIGs submitted recovery plans in 2025 which were reviewed by FINMA. FINMA designed 3 IAIGs as subject to Resolution Planning and reported them in the 2026 FSB Resolution Report consistent with the FSB's Key Attributes 8 to 11. Additional implementation work planned for 2026/2027. ### Cyber resilience and outsourcing - Recommendation 14: Extend cyber and outsourcing regulations to all parts of the financial sector. - Update: Revision of FINMA Circular 2018/03 is underway; initial gap analyses initiated. Extension of FINMA Circular 2023/01 to insurance companies is under discussion. - Recommendation 15: Expand cyber risk oversight over critical third-party service providers, improve incident reporting regulation, and develop a testing framework. - Update (a): A Swiss cybersecurity law is currently being drafted; content intended to be modeled after the EU’s Cyber Resilience Act. Public consultation is scheduled for spring 2027. Project work to define measures for third-party provider risks is underway. - Update (b): Initial analysis initiated to revise incident reporting regulation and to incorporate the Format for Incident Reporting and Exchange (FIRE). Initial discussions and conceptual approaches for a testing framework for strengthening cyber resilience are underway; subsequent discussions with additional authorities planned. ### Anti-Money Laundering / Countering the Financing of Terrorism (AML/CFT) - Recommendation 16: Implement the Register of Beneficial Owners and introduce legal obligations for gatekeepers (lawyers, accountants, etc.) to enhance regulatory oversight. - Update: Parliament adopted the law on the introduction of the Beneficial Owners (BO) register and the modification of the Anti-Money Laundering Act on 26 September 2025. No referendum was demanded. Draft ordinances accompanying these laws were opened to public consultation from 15 October 2025 to 30 January 2026. The laws and accompanying Ordinances are planned to enter into force later this year. - Recommendation 17: Issue more granular supervisory guidance and continue enhancing the monitoring of risks from cross-border activities and virtual assets. - Update: FINMA has focused on high-risk clients and provided guidance (FINMA Risk Monitor 2024 and 2026, FINMA Annual Report 2024). On virtual assets, FINMA emphasized prevention of money laundering related to stablecoins and published FINMA Guidance 06/2024 Stablecoins: risks and challenges for issuers of stablecoins and banks providing guarantees, 26 July 2024. FINMA continues to work towards effective regulation in this area within ongoing legislative projects. ### Financial Market Infrastructure (FMIs) and fintech - Recommendation 18: Increase direct oversight of FMIs and collaboration with foreign authorities. - Update: Implementation on track. In 2026 increase in number and depth of on-site reviews of FINMA at FMIs. Spanish authority CNMV participates in on-site reviews and is strongly involved in planning. FINMA and CNMV exchange every six months; FINMA intends to participate as observer regularly in the BME Clearing Supervisory College. SNB and FINMA participate regularly in supervisory, resolution and crisis management colleges of other authorities. SNB cooperates with relevant foreign authorities for oversight of FMIs domiciled abroad (CLS, Eurex Clearing, LCH) and participates in oversight of SWIFT. - Recommendation 19: Assess banks’ crypto assets exposures comprehensively and implement the Basel prudential standard in a faithful and timely manner. - Update (a): FINMA tracks exposure levels via quarterly crypto reporting to obtain an overview of crypto-related activities and holdings; reporting is continuously analysed and may be further developed. - Update (b): Implementation of the Basel prudential standard is on hold while standards are under review by BCBS. Switzerland supports a timely review and implementation. - Recommendation 20: Develop a governance structure for open finance. - Update: The FDF is engaging with stakeholders. Current priority is to develop precise indicators to measure progress in banking and insurance sectors against established official objectives. ### Macroprudential framework and policies - Recommendation 21: Introduce a binding DSTI cap, remove the ceiling on the CCyB, adopt a positive neutral setting for the CCyB, and introduce a capital-based instrument separate from the CCyB to address remaining systemic risks. - Update: DSTI: A self-regulation by the Swiss Banking Association is in force and approved by FINMA; FINMA monitors application and is in dialogue with industry regarding potential need to concretise the self-regulation. CCyB: As part of the TBTF package cooperation between authorities is being formalized, improving approaches to systemic risks including discussions on borrower-based instruments and a positive neutral CCyB. - Recommendation 22: Establish a formal Systemic Risk Council, including SNB (lead), FINMA, and FDF, with a clear mandate, procedures, and accountability to review and propose measures to mitigate systemic risks. - Update: As part of the TBTF package two existing intragovernmental bodies will be adjusted. The Financial Stability Council led by FDF will meet at least once a year. The Financial Stability Committee led by FINMA will meet at least four times a year, focusing on crisis prevention and coordination. ### Financial safety net, crisis preparedness, and management - Recommendation 23: Develop a clear early intervention framework detailing sufficiently early and forward-looking triggers, tools, and enforcement mechanisms. - Update: The TBTF package will reinforce the early intervention framework, linking distinct indicators to specific tools. Business-as-usual interventions can be triggered by qualitative or quantitative indicators revealing an imminent breach; in higher-risk situations a wider range of tools can be deployed. - Recommendation 24: Adopt a PLB to formalize government backup to ELA provided to SIBs or non-SIBs that may become systemic in failure to preserve financial stability. - Update: As part of the TBTF package a PLB instrument for SIBs will be introduced in ordinary law. - Recommendation 25: Expand, proportionally, recovery planning to all banks, and resolution planning and resolvability assessments to all Category 3 banks and above; enlarge FINMA’s authority to remove impediments to resolution. - Update: The TBTF package strengthens recovery planning for SIBs through clearer requirements and criteria; resolution planning is further improved, including FINMA’s authority to remove impediments. No specific RRP measures for non-SIBs in the TBTF package, but FINMA leverages existing legal framework to improve crisis preparation for category 3 banks. - Recommendation 26: Conduct a deep review of legislation to assess the feasibility of implementing a full range of resolution options and adopt necessary changes. - Update: TBTF package includes improvements of resolution tools and planning aligned with the FSB Key Attributes. - Recommendation 27: Increase the staff working on recovery and resolution. - Update: In the year 2025 FINMA has increased the workforce in recovery & resolution. Further steps are planned in 2026. - Recommendation 28: Operationalize and communicate the comprehensive ELA framework; enable SNB to ask banks to prepare collateral, targeting a wide range of assets. - Update (a): In February 2026 the Swiss National Bank set out in more detail the framework for its announced Extended Liquidity Facility (ELF). SNB defined a standardised and scalable process for the ELF; under the ELF banks can use mortgages and securities as collateral. The ELF process is being tested with pilot banks as well as with SIX Terravis and SIX SIS until mid-2026. The ELF is scheduled to go into operation at the beginning of 2027. - Update (b): The Federal Council considered introducing a requirement for banks to prepare collateral for recourse to central bank liquidity support. For systemically important banks this entails a minimum quantitative requirement covering risks not previously subject to liquidity regulations. For non-systemically important banks, risk indicators for institution-specific estimates of required collateral will be incorporated into regulations. Details are being worked out. Besides mortgages and securities, SNB targets additional asset classes for ELF use by systemically important banks; discussions ongoing. - Recommendation 29: Enhance crisis preparedness by adopting a national contingency plan and conducting regular multi-agency crisis simulations, including cross-border. - Update: Under the TBTF package, regular multi-agency crisis simulations are being conducted. - Recommendation 30: Remove the legal cap on banks’ contributions to esisuisse and introduce an ex-ante fund with back-up from the government. - Update: The Deposit Insurance Scheme (DIS) is being further developed. The TBTF package includes preparatory measures to accelerate payouts of insured deposits. Reforms strengthen the DIS while not relying on a public Deposit Insurance Agency (DIA), ex-ante DIS funding, or use of deposit insurance funds for resolution funding, as previously recommended by the FSAP. *This table is based on information provided by the authorities.* ### Annex XI. Status of Previous Article IV Recommendations ### Annex XI. Status of Previous Article IV Recommendations ### Overall Policy Recommendations - Policies should remain agile and data-dependent, responding to near-term challenges and take action to tackle longer-term, structural issues. - Fiscal and monetary policies were broadly tailored to new challenges (e.g., impact of global and trade uncertainty, safe-haven flows), while structural reforms (e.g., address productivity gaps and further enhance EU relations) were advanced. ### Fiscal Policy - Ensure the revenue neutrality of ongoing tax reforms, which aim to improve efficiency, reduce distortions and level the playing field. - Two major ongoing reforms—shifting to individual taxation and abolishing taxation of imputed rental value—are expected to yield some revenue losses. - For abolishing taxation of imputed rental value, cantons are authorized to introduce a special property tax on second homes to offset revenue losses. - Other revenue-raising options, including potential VAT increases, are under discussion. - Rebuild fiscal space under the debt-brake rule by reducing the amortization account through the phase-out of extraordinary spending and implementing permanent expenditure cuts. - No additional extraordinary expenditure is envisaged beyond 2027. - The pace of reducing the amortization account will depend on the Confederation’s ability to generate fiscal surpluses and on the materialization of extraordinary revenue (e.g., SNB profit distribution). - While Relief Package 27 was approved, only about 60 percent of the proposed permanent spending cuts will be implemented. - Securing additional fiscal adjustments is therefore important to ensure compliance with the debt-brake rule in coming years. - Develop a strategy to address medium-term fiscal pressures, arising from aging-related spending, climate commitments, and higher defense needs. - Authorities continue to update the assessment of long-term fiscal pressures, including through a recent study on health expenditure projections. - Policy debates are ongoing on how to finance rising pension and defense expenditures, including through VAT increases. - The health financing reform is progressing, with the uniform financing scheme for care services being implemented through 2032. ### Monetary Policy - Closely monitor disinflationary risks and carefully weigh further monetary policy easing, given diminishing returns near the effective lower bound and financial stability concerns. - The SNB has kept its policy rate at zero since June 2025 and has expressed a greater willingness to counter future franc appreciation pressures via FXI. - In March 2026, the SNB revised its conditional inflation forecast upward, reflecting rising energy prices. - Mitigate risks from the SNB’s large balance sheet by maintaining appropriately strong capital provisions and refraining from increasing distributions. - In 2025, the SNB set provisions for currency reserves at CHF 12.7 billion. - Together with the distribution reserve of CHF 12.9 billion, this resulted in a net profit of CHF 26.3 billion. - The next review of the SNB’s dividend policy is scheduled for 2026. - FX interventions were limited, with net FX purchases amounting to CHF 5.2 billion. - Conduct a review of the monetary policy framework—potentially with external input—and strengthen transparency and frequency of monetary policy communication. - Since October 2025, the SNB began to publish summaries of its monetary policy discussions, increasing transparency around policy decisions. ### Financial Sector Policy - Continue progress in implementing the 2025 FSAP recommendations, including strengthening supervision, crisis management and resolution, and expanding macroprudential tools. - The SNB will introduce a new Extended Liquidity Facility in 2027. - A parliamentary package under discussion would strengthen FINMA’s crisis powers and address key TBTF concerns. ### Structural Reforms - Address productivity gaps, particularly for SMEs and in the services sector, by streamlining business procedures, improving access to finance, and enhancing competition. - An action plan to reduce regulatory and administrative burden on firms has been developed, outlining measures to simplify procedures, reduce reporting requirements, and expand digital administrative processes. - The Cartel Act was revised, modernizing merger control and strengthening antitrust enforcement. - Further enhance EU relations, improve energy security while working towards achieving climate targets, and address labor shortages and skill mismatches. - The EU-Switzerland “Bilaterals III” package was signed in March 2026 and is subject to ratification. - The package strengthens market access agreements, establishes new cooperation frameworks (notably, in food safety, health, and space), and supports Switzerland’s participation in key EU programs. - It introduces an electricity agreement to enhance market integration and energy security, and updates the free movement of persons framework to improve administrative efficiency and preserve Switzerland’s labor market safeguards. ### Annex XII. Transnational Aspects of Corruption: Updates - Supply Side of Corruption – Criminalization and Prosecution of Foreign Bribery - Switzerland adopted the Federal Council’s Anticorruption Strategy 2026-29 in January 2026, which entails a dedicated objective of detecting and punishing bribery of foreign public officials (Objective 7). - The Strategy envisages measures including developing a legal framework to protect private-sector whistleblowers (Measure 14) and examining the possibility of raising the maximum penalty applicable to legal persons (Measure 16). - Facilitation of Corruption – Preventing the Concealment of Foreign Corruption Proceeds - In 2024, FINMA conducted 113 onsite inspections of banks, 227 AML/CFT-related investigations and initiated 12 enforcement proceedings. - In September 2025, Switzerland adopted a revision to the Anti-Money Laundering Act (AMLA), extending AML/CFT requirements to gatekeeper professions including legal advisors, trust and company services providers, notaries, and real estate agents. - Professionals carrying out covered activities are required to join a FINMA-supervised self-regulatory organization. - Beneficial Ownership Transparency and PEPs - In September 2025, Switzerland passed the Transparency of Legal Persons Act (TLPA), which will come into force in October 2026 and aims to strengthen access to beneficial ownership information by law enforcement authorities. - The TLPA creates a federal register of beneficial owners and introduces transparency requirements for domestic legal entities and foreign legal entities with close links to Switzerland. - Implementation will be sequenced over transition periods, prioritizing the registration of high-risk entities. - International Cooperation - In September 2025, Switzerland signed the Third Additional Protocol to the European Convention on Mutual Assistance in Criminal Matters (AP III ECMC), introducing modernized mutual assistance mechanisms, including facilitation of rapid information exchange to detect and trace illicit financial flows. - Switzerland contributed to drafting provisions for the use of tracking devices on the territory of another party and for the interception of telecommunications. ### Annex XIII. Data Issues - Data Adequacy Assessment - Data Adequacy Assessment Rating: A - Questionnaire Results Median Rating: AAABBAA - Detailed questionnaire results (Data Quality Characteristics): - Coverage: A A B A B - Granularity: B A B B - Consistency: A B A - Frequency and Timeliness: A A A A A - Rationale: The data provided to the Fund are adequate for surveillance. Switzerland publishes timely economic statistics, and most data and methodological documentation are publicly available. However, some data gaps and limitations remain. - Key sectoral data issues - National accounts: Quarterly GDP components rely on indicator-based estimates and implicit deflators, limiting assessment of short-term macro dynamics. - Government finance statistics: Decentralized fiscal system implies early vintages do not fully reflect consolidated general government developments and are subject to revision; public debt statistics lack sufficient granularity by maturity, currency and creditor type; gaps on arrears, guarantees and other contingent liabilities—especially at subnational levels—constrain fiscal risk analysis. - External sector statistics: Large multinational enterprise presence complicates current account measurement (merchanting, complex services trade, income flows); ongoing methodological improvements and expanded surveys have led to sizeable and recurrent revisions affecting 2023-25 data; IIP statistics lack detailed breakdowns by currency, maturity, and counterparty. - Monetary and financial statistics: Core datasets are not available in standard reporting format (SRF); coverage and granularity of nonbank financial institution data are uneven; 2025 FSAP indicates need for more granular data for systemic risk monitoring (e.g., mortgage exposures, trading and investment portfolios, Lombard lending, insurers, pension funds, asset management, secondary market activities, cross-sectoral bilateral exposures). - Changes since last Article IV consultation - A benchmark revision of the system of national accounts was undertaken in 2025, establishing a new base year and providing new structural data. - BOP, IIP, and government finance statistics were updated accordingly, with additional major revisions reflecting the integration of the new current account survey introduced in 2023 and surveys on cross-border capital linkages at multinational enterprises; revisions mainly affected 2023-25 data. - Compilation of sectoral balance sheets improved by incorporating actual rather than estimated data on transactions and capital gains and losses. - Corrective actions and capacity development priorities - No IMF TA is envisaged. - Staff does not use any data and/or estimates in the staff report in lieu of official statistics. - Other data gaps - Need for more integrated climate-related datasets linking emissions, sectoral activity, fiscal measures, and climate-related financial risks to support macro-financial surveillance and fiscal sustainability analysis. - Need for more timely and granular indicators on digitalization (e.g., digital financial services and fintech activity). ### Data Standards and Common Indicators (selected) - Switzerland adheres to the Special Data Dissemination Standard (SDDS) Plus since January 2021 and publishes data on its National Summary Data Page. - Table of Common Indicators Required for Surveillance (as of July 08, 2026) — selected latest observations and data receipt dates: - Exchange Rates: Date of Latest Observation 2026-06-30; Date Received 2026-07; Frequency of Data D - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Observation 2026-06; Date Received 2026-07; Frequency M - Reserve/Base Money: Date of Latest Observation 2026-05; Date Received 2026-06; Frequency M - Broad Money: Date of Latest Observation 2026-05; Date Received 2026-06; Frequency M - Consolidated Balance Sheet of the Banking System: Date of Latest Observation 2026-04; Date Received 2026-06; Frequency M - Interest Rates: Date of Latest Observation 2026-06-30; Date Received 2026-07; Frequency D - Consumer Price Index: Date of Latest Observation 2026-06; Date Received 2026-07; Frequency M - Revenue, Expenditure, Balance and Composition of Financing—General Government: Date of Latest Observation 2026-03; Date Received 2026-06; Frequency Q - GDP/GNP: Date of Latest Observation 2026-03; Date Received 2026-05; Frequency Q - Exports and Imports of Goods and Services: Date of Latest Observation 2026-03; Date Received 2026-06; Frequency Q/M ### Fund Relations (selected) - Membership Status: Joined May 29, 1992; Article VIII. - Quota: 5,771.10 SDR Million, 100.00 percent of Quota. - Fund holdings of currency: 4,240.10 SDR Million, 73.47 percent of Quota. - Reserve position in Fund: 1,531.54 SDR Million, 26.54 percent of Quota. - SDR Department net cumulative allocation: 8,819.38 SDR Million, 100.00 percent allocation. - SDR Department holdings: 9,435.75 SDR Million, 106.99 percent. - Outstanding Purchases and Loans: None. - Financial Arrangements: None. - Projected Payments to Fund (SDR Million; Principal and Interest): Forthcoming 2026–2030 Principal 0.04; Interest 0.04; Total 0.04 (each year). - Exchange Rate Arrangement: - De jure: free floating; SNB reserves the right to intervene in the foreign exchange market. - De facto classification: crawl-like from April 25, 2025, as bilateral volatility of the exchange rate against the euro has been below the 2-percent threshold. - Latest Article IV Consultation: Last consultation concluded on July 1, 2025; staff report published on September 16, 2025; standard 12-month consultation cycle. - Technical Assistance: No IMF TA envisaged; Switzerland is a major financial supporter of IMF externally-financed capacity development and related initiatives. - Financial System Stability Assessment: A mandatory FSAP was concluded during the 2025 Article IV consultation; FSSA and Detailed Assessment Report (Basel Core Principles) and Technical Notes have been published. *Source: Annex XI–XIII and Fund Relations, Staff Report for the 2026 Article IV Consultation — Informational Annex.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1cheea2026001.pdf_