Liechtenstein’s banking industry as well as the entire finance sector have survived the coronavirus crisis well to date. The Financial Stability Report by the Financial Market Authority shows that while client assets under management have fallen, profitability and capitalization have increased.
The Financial Market Authority has presented its latest report on the stability of the financial market in Liechtenstein. In it, particular attention is paid to the consequences of the coronavirus pandemic. The country must expect a decrease in economic output of 4 percent for this year. However, the economy has shown great resilience, with the labor market having weathered the crisis well so far.
The financial center has remained stable in a turbulent environment. Client assets under management decreased due to the financial market correction in the first half of the year but profitability and capitalization have in fact increased against the international trend. However, there is still potential for further improvement.
Despite this, the Financial Market Authority warns of the real economy crisis spreading into the financial sector, which has to overcome the twin challenges of low interest rates and high ratings for financial markets. For this reason, a “careful, cautious dividend policy remains essential across the entire finance sector,” according to a summary of the report.
Conversely, an increase in interest rates could place pressure on private households. Their high level of debt is a “cause for concern” and represents “one of the main risks in the banking industry”. The Financial Stability Council could suggest measures to ensure sustainable standards in credit issuance if needed.
In contrast, the Financial Market Authority praises the government’s measures to mitigate the effects of the coronavirus on the economy and the virtually zero debt of public finances.
