Nor can it take too long as this would risk creating incentives to return to the unsatisfactory behaviour exhibited prior to the crisis. Defining the transition phases is possibly the most difficult challenge. The transition is characterised not only by the lag between decisions relating to new prudential regulations and their application, of which I spoke earlier, but also by the extraordinary measures in terms of monetary and financial policy, adopted by governments and central banks to combat the recession and support the financial system in facing the systemic crisis. 17  In fact, recent studies have shown that securitisation and credit derivatives tend to increase the supply of bank loans; see, for instance, Estrella, “Securitisation and the efficacy of monetary policy”, Economic Policy Review, vol. 8(1), Federal Reserve Bank of New York, 2002; Hirtle, “Credit derivatives and bank credit supply”, Federal Reserve Bank of New York Staff Report, n. 276, 2007; Y. Altunbas, L. Gambacorta, D. Marques-Ibanez, “Securitisation and the bank lending channel”, European Economic Review, Vol. 53, Issue 8, 2009. The major central banks have promptly and forcefully responded to the crisis with a broad variety of measures. The classical prescription by Walter Bagehot, which describes central banks as lenders of last resort, has proven to be as valid today as it was 137 years ago when “Lombard Street” was first published. 18 Accommodating the sudden increase in the demand for liquidity prevented a disorderly de-leveraging process, prevented illiquid but solvent banks from going bust, and, more broadly, sustained confidence in the economy.

In this context, the SNB supports the recommendations by the group of experts headed by Professor Brunetti on the evaluation of the “too big to fail” regulatory framework. The report advocates a recalibration of capital requirements in order to ensure that Switzerland is in a leading position internationally in terms of the requirements for both risk-weighted capital ratios and leverage ratios. In particular, the report stresses that leverage ratio requirements for systemically important banks have been increased in several countries compared to the minimum proposed by the Basel Committee. In the SNB’s view, a possible recalibration of capital requirements must reflect the size and concentration of our banking sector. In fact, it is imperative that a lasting solution be found for the “too big to fail” issue in Switzerland. Increasing the credibility of model-based risk-weighted assets Beyond recalibrating capital requirements, increasing the credibility of the model-based riskweighted assets (RWA) is essential. This is all the more important as RWA remain a key element of banking regulation. The Brunetti group of experts, too, considers this to be a prime objective and the issue has also been recognised at international level. The Basel Committee has therefore announced the release of a set of measures for consultation. These measures mainly provide for the revision of the standardised approaches for RWA calculation, the introduction of an RWA floor based on the standardised approaches, as well as greater transparency. The floor is aimed at ensuring that the requirements for banks using the model-based approach remain sufficiently prudent.