SNB Financial Stability Reports Found Lacking in Predictive Ability
The Swiss National Bank (SNB) publishes an annual Financial Stability Report to inform bank supervision and regulation. The report's analysis determines potential changes to the countercyclical capital buffer (CCyB), which was activated in 2013, increased in 2014, suspended in 2020, and reactivated in 2022.
A recent AI-based analysis found that the SNB Financial Stability Reports performed no better than reports from other central banks. The analysis showed that the reports failed to identify novel risks that eventually materialized. In fact, the identified risks did not occur, imposing unnecessary capital requirements on lenders.
The reports also missed significant risk identification leading up to the 2008-09 financial crisis. This suggests that the SNB's discretionary framework for setting the CCyB may need reassessment.