Finance sector resistant to pandemic
Liechtenstein’s finance sector has proven to be stable in the course of the coronavirus pandemic and is well-positioned for future challenges as well. This is part of an assessment by the Financial Stability Council (FSC), which nonetheless recommends restraint in dividend payouts and share buybacks.
In its meeting on 29 June, the Financial Stability Council (FSC) discussed the economic situation and developments in the finance sector in view of the coronavirus pandemic, an FSC press release reveals. The central body for the macroprudential supervision of financial markets in Liechtenstein remarks that the country’s finance sector “remains stable and well-positioned for the challenges of the future”, despite the threat of a second wave in the pandemic and the current recession.
During its discussion of the situation, the FSC reportedly also focused on the recommendations from the European Systemic Risk Board (ESRB). In this regard, the FSC urges that the ESRB’s recommendations are followed with regard to “restraint on dividend payments, share buybacks and other variable remuneration by banks, insurers, reinsurers and central counterparties until the end of the year”. However, the FSC rejects a total ban of the listed activities as this would not be proportionate given “the clearly above-average capitalization of Liechtenstein’s banking and insurance sector as well as its legal framework”.
The current countercyclical capital buffer rate for banks is also set to remain at 0 percent of risk-weighted assets. As in the previous year, the three institutions categorized as systemically important by the Financial Market Authority Liechtenstein (FMA) are the only ones to be assigned a buffer of 2 percent of risk-weighted assets.