Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereign, sub-sovereign and supranational issuers. Monitoring reviews are unrelated to the calendar that outlines public finance rating actions.

Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Switzerland (AAA/Stable; S-1+/Stable) on 21 October 2020. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Switzerland’s AAA rating is underpinned by i) its wealthy and well-diversified economy with a high level of labour productivity; ii) moderate levels of debt and sound fiscal management; and iii) a strong external position, effective financial policy settings and highly developed capital markets, underpinned by the safe-haven status of the Swiss franc. The government adopted a large fiscal package to mitigate adverse economic effects from the Covid-19 shock, which alongside the cyclical fiscal deterioration will cause the general government debt-to-GDP ratio to increase, nevertheless remaining lower than in most of its sovereign peers. Challenges include i) a large banking sector and exposures to real estate risk; and ii) further appreciation pressures on the Swiss franc. These risks are mitigated by the Swiss banking sector’s strong credit fundamentals as well as the Swiss Financial Market Supervisory Authority (FINMA)’s macroprudential policy framework.

Despite the prolonged uncertainty around Switzerland’s relationship with the EU regarding the new framework agreement, Scope expects a constructive relationship between the EU and Switzerland over the longer-term.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.

This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Levon Kameryan, Analyst

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