Finally, I will place the challenges that face us within a long-term perspective. 1  Youssef Cassis, Les Capitales du Capital. Histoire des places financières internationales 1780–2005, Geneva (Éditions Slatkine, Pictet & Cie) 2005, 47–48. 2  Cf. www.ville-geneve.ch/histoire-chiffres/place-financiere/ and www.geneve-finance.ch/en-ch/overview/geneva -financial-center. 3  Cf. www.geneve-finance.ch/en-ch/overview/facts-figures. BIS central bankers’ speeches  1  Close interactions between the SNB and the Swiss financial sector As an independent central bank, the SNB’s mandate is to ensure price stability, while taking due account of economic developments in Switzerland. It also has the task of contributing to the stability of the financial system. Banks, and the financial sector in general, contribute to the prosperity of our nation. On the one hand, financial intermediation, wealth management and the various other financial services provided by the financial sector are vital for an efficient economic environment. On the other hand, the same activities create employment and value added, both directly and indirectly. They are thus a source of economic prosperity. The activities and goals of the SNB and the financial sector, apparently unrelated, are however closely interlinked. The connections between the two were particularly apparent during the recent financial and European debt crises. The SNB and the financial sector need one another, as I will now show (cf. chart 1). Banks need the SNB to conduct their various business activities, since the SNB acts as the bank of banks. First, banks use the currency issued by the SNB as the numeraire in their daily business.

In order to meet these challenges, we have had to use unconventional instruments for the implementation of monetary policy. Our current monetary policy is based on two pillars. These are designed to dampen upward pressure on the Swiss franc. The first pillar is the negative interest rate on sight deposits at the SNB. The second pillar is our willingness to intervene on the foreign exchange market as required. The SNB monitors developments in the foreign exchange market and their potential effects on the Swiss economy very carefully. At a global level, interest rates have been on a downward trend for more than two decades (cf. chart 4). This development reflects, on the one hand, an overall decrease in inflation. On the other, quantitative easing programmes implemented by various central banks in response to the financial crisis have brought global interest rates close to zero. In an interconnected financial world, it was impossible for Swiss interest rates to diverge from this strong and persistent downward trend. Very low global nominal yields have reduced the interest rate differential between foreign and Swiss interest rates. By the end of last year, the spread between short-term interest rates on assets denominated in euros and those denominated in Swiss francs had almost vanished. As I mentioned earlier, interest rates have traditionally been lower in Switzerland than abroad. However, during the financial crisis, foreign interest rates decreased to a greater extent than their Swiss counterparts.