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      Scope has completed a monitoring review for the Swiss Confederation
      FRIDAY, 19/04/2024 - Scope Ratings GmbH
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      Scope has completed a monitoring review for the Swiss Confederation

      The periodic review has resulted in no rating action.

      Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

      Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

      Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

      Scope completed the monitoring review for the Swiss Confederation (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 16 April 2024.

      This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

      Key rating factors

      For the updated rating report accompanying this review, click here.

      Switzerland’s AAA ratings are underpinned by: i) its wealthy and well-diversified economy, highly skilled labour force and institutional strengths, including a stable, consensus-oriented and effective policy framework, which underpin a high degree of economic resilience; ii) strong fiscal fundamentals, driven by a strong commitment to longer-term debt sustainability and stringent and constitutionally-anchored budgetary rules, in addition to favourable financing conditions; and iii) a significant net external asset position, highly competitive exporting industries and the safe-haven status of the Swiss franc.

      Challenges include: i) a highly concentrated and very large banking sector in relation to GDP, posing potential contingent liability risks to public finances, as highlighted by the Credit Suisse crisis in March 2023; ii) imbalances in the real estate market with high, albeit declining, levels of residential overvaluation, after the continued increase in residential property prices since 2020, increasing vulnerability to market corrections. These risks are mitigated by the significant wealth of Swiss households, as well as by the effective financial policy making and the Swiss Financial Market Supervisory Authority’s prudent supervisory framework. Finally, there exist some uncertainties about future Swiss-EU trade relations, although negotiations have recently resumed.

      In response to the Credit Suisse crisis, the Swiss Federal Council will make the public liquidity backstop a permanent feature under ordinary law for systemically important banks (SIBs). In addition, the Federal Council has concluded an in-depth assessment of the ‘too-big-to-fail’ regulation in April 2024. In particular, the Federal Council proposed a package of 22 measures, including: i) strengthening crisis prevention for SIBs, including via higher capital requirements, and by ensuring good corporate governance as well as more accountable risk management through the introduction of a senior managers regime and bonus clawback provisions; ii) strengthening SIBs’ own liquidity holdings and expanding the potential for liquidity provision by the Swiss National Bank; and iii) expanding the crisis toolkit to enable an orderly market exit of SIBs in the event of a crisis. This includes ensuring that a bank’s recovery plan can be implemented quickly and conducting resolvability assessments for SIBs.

      The Stable Outlook reflects Scope’s assessment that risks to the ratings are balanced.

      The ratings/Outlooks could be downgraded if, individually or collectively: i) financial stability risks materialised with significant negative implications for the economic growth and public finance outlook; and/or ii) the economic outlook worsened materially, for example due to a significant deterioration in relations with the EU and trade disruptions.

      The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 29 January 2024) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst Julian Zimmermann, Associate Director

      © 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

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