The core element in the package of measures was the stabilisation fund, which took over illiquid assets from UBS totalling almost USD 40 billion. The SNB funded 90% by granting the stabilisation fund an interest-bearing loan. For its part, UBS provided the stabilisation fund with equity corresponding to 10% of the  4  BIS central bankers’ speeches  transferred assets. 1 Moreover, to strengthen UBS’s equity, the Swiss Confederation subscribed to mandatory convertible notes in the amount of CHF 6 billion. 2 By April 2009, the illiquid assets had been transferred to the stabilisation fund from UBS. Subsequently, the portfolio was managed and reduced. The main goal was complete repayment of the loan to the SNB. Sales as well as principal repayments and interest payments did indeed result in a gradual repayment of the SNB loan. By mid-August 2013, the loan had been fully repaid. Finally, in November, UBS purchased the stabilisation fund by reimbursing the SNB its contractual share in the fund equity. At this point, the stabilisation fund assets were entirely liquid. The conclusion of this transaction was a major and exceptional achievement. To strengthen the financial system, the SNB had stated, in autumn 2008, that it was prepared to finance the takeover of assets up to a value of USD 60 billion by the stabilisation fund. For the success of this undertaking it was important that we could handle our balance sheet flexibly. This package of measures enabled both investors and savers to regain confidence in UBS.

Given this situation, in 2013, the SNB made a proposal to the Federal Council, after consultation with the Swiss Financial Market Supervisory Authority (FINMA), that the sectorial countercyclical capital buffer (CCB) be activated for the first time, at 1% of riskweighted mortgage loans financing residential property located in Switzerland. The Federal Council acted on the proposal. Since last September, banks have therefore been required to provide more capital backing for residential mortgage loans in Switzerland. Certainly, momentum on the mortgage and real estate markets was dampened somewhat in 2013. However, the measures introduced by the beginning of 2013, such as the activation of the CCB as well as those taken by the industry itself, were insufficient to prevent a further build-up of imbalances. Therefore, the volume of mortgage lending was still rising at a substantially stronger pace than national income. As a result, in Switzerland as a whole, debt was increasing significantly faster than people’s capacity to offset this debt with income. This  BIS central bankers’ speeches  3  development is particularly critical because the correlation between mortgages and national income is very high, both in historical terms and compared with other countries. In addition, in an environment of persistently low interest rates, coupled with banks’ undiminished appetite for risk, the danger remained considerable that imbalances would build up further unless additional countermeasures were taken. In January 2014, therefore, acting on a proposal by the SNB, the Federal Council increased the CCB from 1% to 2% of risk-weighted positions financing residential property in Switzerland.