Philipp Hildebrand: Globalisation and current developments in the
financial markets
Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of
the Swiss National Bank, at the Swiss Institute of International Studies, Zurich,
13 March 2008.
The complete speech can be found in German on the Swiss National Bank's website (www.snb.ch).
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Fundamentally, globalisation is not a new phenomenon, and yet the world has changed
dramatically in the past twenty years. This is also evident in financial markets, where, since
August 2007, a local event like the correction in the US residential property market has
rapidly developed into a global event. We are now experiencing the first truly major crisis of
financial globalisation.
The longer the crisis lasts, the harder it will be - but also the more important - to keep in
mind the advantages of financial globalisation and preserve them in the long run. There is a
need for regulatory correction, and such a need will remain in the future. The existing system
of regulation and supervision should be further improved. The regulation of liquidity and
equity, in particular, needs to be fine-tuned, strengthened and adjusted to the latest
developments in financial markets. However, it is possible that more will be needed than just
the fine-tuning of regulations. The buffers in the financial system have to be strengthened. In
simple terms, what is ultimately required is that international banks strengthen their capital
backing. At the same time, bigger liquidity cushions are needed. In addition, the authorities
should look into the possibility of supplementing the complex regulations with simpler and
more robust indicators such as, for instance, more effective concentration limits and an upper
limit for the indebtedness ratio.