Basel III Final: SBA updates self-regulation on mortgages

The Swiss Bankers Association (SBA) has updated its self-regulation on mortgage lending as part of the Swiss implementation of Basel III Final. Changes include more differentiated wording for tried-and-tested requirements on assessing and valuing loans secured against property. The updated self-regulation is expected to enter into force on 1 January 2025, at the same time as the revised Capital Adequacy Ordinance and the new FINMA ordinances.

The Swiss Bankers Association (SBA) is responsible for two self-regulation regimes relating to mortgages, both of which are recognised by the Swiss Financial Market Supervisory Authority FINMA as minimum standards under supervisory law. These are the Guidelines on minimum requirements for mortgage loans and the Guidelines on assessing, valuing and processing loans secured against property. Both have been updated in line with the Swiss implementation of Basel III Final.

Background to the SBA self-regulation

The minimum requirements govern the borrower’s use of own funds and set out specific limits with regard to amortisation. They are directly linked to the Capital Adequacy Ordinance (CAO): loans that comply with the guidelines are given a preferential (i.e. lower) risk weighting.

The guidelines on loans secured against property, meanwhile, contain qualitative requirements for banks’ internal mortgage lending business processes. In particular, they regulate lending policies, loan monitoring and reporting.

Minimum requirements: The main change is the lifting of the stricter rules introduced in 2019 for investment properties. The same rules (minimum 10% own funds and amortisation to two thirds of the lending value within 15 years) will therefore apply to all types of property again in future. The reason for this is that the risk weightings for buy-to-let mortgages on residential properties will be significantly higher under Basel III Final, which will make it more expensive for banks to grant these mortgages. This replaces the stricter minimum requirements. Other changes include a more precisely defined scope of application (e.g. limited to mortgage loans on residential and commercial properties in Switzerland) and clearer rules on the eligibility of loans from close family members as own funds.

Guidelines on loans secured against property: There are three changes to the qualitative requirements for lending and risk management. Firstly, the scope of the self-regulation is extended to include housing cooperatives, thus ensuring that the corresponding loans can also benefit from preferential risk weightings under Basel III Final. Secondly, the requirement under Basel III Final for an independent valuation is clarified, resulting in amendments regarding the use of valuation models, among other things. The explicit integration of Basel rules ensures greater consistency between the different sets of regulations and compatibility with the international standard. Thirdly, a new duty to conduct periodic reassessments of creditworthiness and affordability is introduced. This takes account of the authorities’ long-standing concerns over rising affordability risks.

FINMA recognises updated SBA self-regulation

The new provisions in both sets of guidelines have been formulated in a principles-based and technology-neutral manner, giving banks sufficient freedom in their implementation. Clients, for their part, will hardly notice any change at all.

These latest revisions of the minimum requirements and the guidelines on loans secured against property were drafted by our Real Estate Working Group in close dialogue with FINMA. FINMA has once again recognised the revised self-regulation as a minimum standard under supervisory law.

Both sets of guidelines will enter into force at the same time as the Swiss implementation of Basel III Final, i.e. together with the revised CAO and the new FINMA ordinances. The Federal Council has decided that this will happen on 1 January 2025. However, the Federal Department of Finance (FDF) will report to the Federal Council on the progress made with international implementation once more by the end of July 2024 at the latest.

Regulation & compliance


Remo Kübler
Head of Research & Real Estate
+41 58 330 62 26

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