Reuters: Private Equity: UPDATE 1-IMF says Swiss franc cap appropriate for now

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UPDATE 1-IMF says Swiss franc cap appropriate for now May 8th 2012, 20:23 Tue May 8, 2012 4:23pm EDT WASHINGTON May 8 (Reuters) - The Swiss National Bank's cap on the strong franc is appropriate given slow growth and deflation risks, but authorities should return to a floating exchange rate when growth and inflation stabilize, the International Monetary Fund said on Tuesday. Timing the end of the cap, which the Swiss National Bank put in place as safe-haven flows drove up the value of the currency, hurting the export-heavy Alpine economy, will be tricky, the fund said in a routine review. While Switzerland's economic fundamentals and policies are strong, the fund said that the country faces risks from the euro zone debt crisis as well as vulnerabilities in its domestic financial sector. While Swiss banks meet regulatory capital requirements, large banks have "a relatively thin layer" of high-quality capital, the fund said. Internally, loose monetary policy may be fueling a mortgage credit and real estate bubble, the IMF warned. That bubble puts domestically-oriented banks and insurers at risk, the fund added.

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