The Exposure of Swiss Banks to Macroeconomic Shocks - an Empirical Investigation

Hansjörg Lehmann and Michael Manz



JEL classification
G21, E44, C33

banking, macroeconomic shocks, stress tests, credit risk, interest rate risk, Switzerland


Assessing financial stability is an issue of rapidly growing importance to central banks and banking authorities. This paper explores an extensive panel data set of Swiss banks to identify macroeconomic influencing factors on bank profitability and to quantify their impact on bank capitalization. We find evidence of a significant effect of various macroeconomic variables as e.g. real growth or interest rate shocks on bank earnings. However, our results suggest that the Swiss banking system is quite robust against macroeconomic shocks. Only a joint occurrence of a recession, rising interest rates and falling stock prices would lead to substantial losses in the Swiss banking industry.