FINMA Warns of Stubborn Property Vulnerabilities and Rising Cyber Threats in 2025 Risk Monitor

2025-11-18 · Regulation · QuoteReporter

Switzerland’s Financial Market Supervisory Authority FINMA published its annual Risk Monitor for 2025 on Monday, delivering a sobering but unsurprising message to the country’s banks, insurers, and asset managers: most of the biggest threats that have loomed over the Swiss financial sector for years are still very much alive, and a couple have actually gotten worse.

In a year dominated by resurgent inflation fears, U.S. trade tariffs that hit Swiss exporters harder than most, and an ever-more hostile cyber landscape, FINMA kept eight of last year’s nine principal risks on its watchlist and upgraded two of them. The only risk to be downgraded and removed from the top tier – obstacles to international market access – reflects the fact that Swiss institutions have largely adapted to post-equivalence cross-border frictions with the EU. Yet that small piece of good news is heavily outweighed by everything else that remains firmly red-flagged.

At the very top of the list, unchanged from prior years and still rated high: risks associated with real estate and mortgages. Even though the torrid pace of Swiss property price growth has cooled from the negative-interest-rate era, household mortgage debt remains among the highest in the world relative to GDP. A sharp correction would hit retail banks first and hardest through loan losses, while life insurers – after years of piling into real estate during the long low-yield period – would also suffer significant investment-portfolio hits. FINMA makes clear it will continue running stress tests, surveying overseas real-estate exposures, imposing institution-specific capital add-ons where necessary, and hammering compliance with the industry’s self-regulatory mortgage-underwriting standards during on-site inspections.

Credit portfolios outside the mortgage book – particularly leveraged finance, Lombard lending, and corporate/SME exposures – remain another unchanged but elevated risk. Years of easy money left balance sheets vulnerable, and the rapid rise of private markets lending adds a new contagion channel that FINMA is watching closely.

Market risk from widening credit spreads has been upgraded to “increased” (↑), reflecting rising geopolitical and political risks worldwide that could suddenly reprice corporate and sovereign debt. Liquidity and funding risks – the nightmare scenario of a modern bank run turbocharged by social media – stay firmly on the list, as do money-laundering, sanctions compliance, and outsourcing risks.

The two risks that received the upward arrow are both technology-related: cyber risks and broader ICT (information and communication technology) risks are now explicitly flagged as having worsened. With ransomware groups growing more sophisticated and state-sponsored attacks continuing unabated, FINMA is clearly telling the industry that yesterday’s defences are no longer enough.

One notable absentee from last year’s principal-risk list is “international market access for financial institutions.” After years of warnings about losing EU equivalence and the resulting cross-border headaches, FINMA now judges that Swiss firms have largely adjusted. That relief, however, does not extend to the broader Swiss economy, which is feeling the bite of U.S. tariffs introduced in August 2025 – temporarily as high as 39% on roughly 60% of Swiss exports to the U.S. A memorandum of understanding signed November 14 will bring those tariffs down to EU levels (15%), but the episode is a reminder of how quickly trade policy can become a macroeconomic shock.

The report’s tone is characteristically Swiss: measured, technical, and devoid of drama. Yet the message between the lines is unmistakable – the Swiss financial centre remains highly exposed to a property correction, credit-spread shocks, and cyber incidents, and supervisors expect boards and senior management to treat these risks with the seriousness they deserve.

FINMA also signals it will lean harder on tools such as targeted stress tests, deep-dive inspections of leveraged-finance and Lombard books, enhanced monitoring of foreign-currency funding, and tougher scrutiny of outsourcing and third-party risk management. A separate appendix on climate-related financial risks (now a standing feature) underscores that the transition and physical risks from global warming are here to stay on the supervisory agenda.

For Swiss compliance and risk teams, the 2025 Risk Monitor is required reading. The threats it highlights are not new, but they are persistent – and in the case of cyber and credit-spread risks, growing. In an environment where U.S. trade policy can swing tariff rates overnight and ransomware gangs evolve faster than most defences, complacency is not an option.

The full FINMA Risk Monitor 2025 is available here:
https://www.finma.ch/en/~/media/finma/dokumente/dokumentencenter/myfinma/finma-publikationen/risikomonitor/20251117-finma-risikomonitor-2025.pdf?sc_lang=en

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