The question should thus be rephrased as “How can we identify that the build-up of risk is approaching a critical stage?” International evidence suggests a palette of quantitative early warning indicators that are reliable with respect to predicting banking crises and financial instability. For instance, real estate boom-bust cycles are particularly damaging when associated with increased leverage in both the real and financial sectors. To obtain a more accurate picture of the intensity of systemic risk, a combination of indicators should be monitored simultaneously.13 In this spirit, the Swiss approach relies on a combination of indicators to assess whether, and to what extent, the activation, adjustment or deactivation of the CCB is warranted.14 These indicators have been chosen based on their past performance as early warning indicators both for Switzerland and internationally (slide 6). Still, a purely mechanical response to financial stability risk depicted by a set of indicators, while providing a certain degree of transparency, is risky. For instance, it would leave no room for considering the influence of developments not captured by these indicators. As a consequence, an element of discretion should be embedded in the decision to activate the CCB, or not, at a given point in time.15 The current situation provides a good example: The medium-term risks to financial stability remain high, with imbalances in certain segments persisting. Some recent data releases, however, indicate a possible slowdown in momentum in Swiss mortgage and real estate markets during the second quarter of 2012.

It rests on a two-pillar approach: on the one hand the economic analysis examines cyclical, economic and financial indicators related to the main determinants of short-term inflation; on the other hand the "monetary analysis" looks at the behaviour of money and credit aggregates and provides a perspective on longer-term inflation. Cross-checking the outcome of the economic analysis – broadening growth in the euro area – with the monetary analysis – ample liquidity and strong monetary growth – supports the assessment of risks over the medium to long-term horizon, which have led to the Governing Council’s decisions since December 2005. Implementation is decentralized. Monetary policy decisions taken by the Governing Council of the ECB are implemented by the NCBs. This framework has proven its robustness and efficiency. But there are limits to what monetary policy can deliver. Its main contribution to growth is to achieve price stability. Ultimately, however, whether this will translate into higher growth in the longer run depends on reforms aimed at increasing the economy's potential. Here European countries are making progress, although at too slow a pace. 3)  How can EU Member States increase their growth potential? In 2000, the Lisbon European Council designed a new strategy in order to promote competitiveness of the EU and defined ambitious goals in that respect. The Lisbon agenda has introduced a multilateral surveillance of structural policies. In 2005, EU Heads of Government re-launched the Lisbon strategy with an enhanced focus on jobs and growth and a streamlined governance regime.