The crisis does not pose a widespread threat to Swiss finance, but some individual institutions are more exposed to risks from the loss of business with Russia, Urban Angehrn, chief executive of the Swiss Financial Market Supervisory Authority, said.
"This conflict poses numerous risks for the Swiss financial sector and accentuated risks for individual institutions," Angehrn said as he presented the regulator's annual report. "We will keep a watchful eye on them."
"We currently assess the situation in such a way that the conflict does not pose a widespread threat to the Swiss financial market," he said, in written comments originally published in German.
Among the risks faced by Swiss institutions, Angehrn noted, is that some firms could be locked into loans or bank-financed trade agreements with Russian clients, potentially suffering losses because they are not able to process transactions with sanctions in place. Swiss commodities and derivatives traders are particularly vulnerable to these risks, Angehrn said.
Another risk area for the Swiss finance sector is whether finance firms adequately comply with financial sanctions imposed by the Swiss and other Western governments, Angehrn said in his speech.
"Our expectations here are clear: the sector must conduct its business properly, which includes enforcing sanctions," he continued. "Dealing with them is by no means new for the institutions, but the scale and complexity have increased sharply."
Swiss institutions also face operational risks from potential cyberattacks as sanctions tighten on Russia, according to Angehrn, who took up the post in July 2021.
The chief executive of the regulator, also known as FINMA, cautioned that banks should remain vigilant as the situation could change rapidly. But he added that there is no evidence of widespread attacks that could threaten banks' operations.
The FINMA head said the banking regulator will be focused on larger or more-exposed bodies as the situation develops. But, overall, first-order risks from the conflict are considered to be "manageable", despite Swiss banks being largely unable to pay in rubles or conduct payment transactions with Russian correspondent banks. Correspondent banks provide services such as wire transfers to another lender and are typically based in different countries.
"Ultimately operational difficulties can also arise in payment transactions, namely if correspondent banks disappear and no more payments can be made in rubles," Angehrn said.
Angehrn warned that FINMA was prepared to intervene or impose protective measures on banks at short notice to protect depositors, which is what happened with the Swiss branch of Russia's Sberbank in March.
Switzerland's government adopted the European Union's financial sanctions on Russia in March, barring the country's banks from the SWIFT global financial messaging network following the invasion.
The SWIFT ban followed on from Switzerland's initial financial and trade sanction in February, which froze the assets of Russian individuals and companies holding assets with Swiss financial institutions.
Three days later FINMA ordered the Swiss subsidiary of Russia's largest lender, Sberbank, to suspend its payments and transactions until May in an effort to protect creditors against losses.
The suspension order made it the second European Sberbank subsidiary to face severe setbacks from Russia's invasion of Ukraine, after the Austria-based Sberbank Europe AG filed for court-supervised insolvency proceedings.
-- Additional reporting by Najiyya Budaly and Irene Madongo. Editing by Ed Harris.
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