17  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Price stability vs. financial stability Current situation in Switzerland  18  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Price stability vs. financial stability Current situation in Switzerland  Low reference rate remains necessary  19  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Price stability vs. financial stability Current situation in Switzerland  Low reference rate remains necessary  20  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Price stability vs. financial stability Current situation in Switzerland  Low interest rate environment promotes ... Low reference rate remains necessary  • ... a build-up of imbalances: 2000:  Mortgage loan volume  * 100 = 110%  2017:  Mortgage loan volume  * 100 = 145%  GDP  GDP  • ... risk appetite among banks  21  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Should the interest rate tool be used to curb excesses on the credit market? NATIONAL BANK ACT Article 5: Tasks 1 The National Bank shall pursue a monetary policy serving the interests of the country as a whole. It shall ensure price stability. In so doing, it shall take due account of economic developments.

Credit risk  8  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Credit as a burden for an entire economy Excesses on the credit market  Debt crisis  c Loss of income and financial assets  Greater uncertainty  Restricted credit supply  Less consumer spending  Less investment  Less innovation  Long and deep recession 9  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Weak recovery  Credit as a burden for an entire economy – excessive risk-taking Macroeconomic environment Upturn Low interest rates Asset prices  Systemic risks  Distorted expectations  10  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Credit as a burden for an entire economy – excessive risk-taking Macroeconomic environment Upturn Low interest rates Asset prices  Systemic risks  Distorted expectations  11  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Credit as a burden for an entire economy – excessive risk-taking Macroeconomic environment Upturn Low interest rates Asset prices  Systemic risks  Distorted expectations  12  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Credit as a burden for an entire economy – excessive risk-taking Macroeconomic environment Upturn Low interest rates Asset prices  Systemic risks  Distorted expectations  13  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Credit as a burden for an entire economy  Macroeconomic environment Upturn Low interest rates Asset prices  Systemic risks  Distorted expectations  14  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Credit as a burden for an entire economy  Macroeconomic environment Upturn Low interest rates Asset prices  Systemic risks  Distorted expectations  15  1 November 2017  Collegium generale | Fritz Zurbrügg | © Swiss National Bank  Part 3: What role do central banks play in the credit cycle?