Generally speaking, the better the earnings prospects, the higher the risk of losses. Certainly, the improved currency diversification was an extremely low-cost lunch for the SNB. Nevertheless, the introduction of additional investment classes and instruments, together with more active management of investments, brought new risks as well. Consequently, we have extended and enlarged our risk management activities in recent years, alongside the changes in our investment policies. We now run a comprehensive risk management operation which is based on best-practice methods in the finance industry while also taking account of the special requirements of a central bank. We attach great importance to nurturing an appropriate risk culture, including ongoing identification, measurement, evaluation, limitation and monitoring of risks as well as timely, comprehensive reporting allowing for regular risk assessment and control. A key aspect is the fact that our risk management reports independently to the Governing Board and the Bank Council Risk Committee. This is also important because all operational functions in the area of investment policy are concentrated in one department for reasons of efficiency. One of the special risks for a central bank is the fact that investment policies must not conflict with monetary policies. The liquidity requirements of monetary policy as well as the ability of investments to withstand crises are key parameters for investment strategy. Also, since we are unable to predict the timing of interventions or the volume of currency reserves that will be needed, we cannot resort to asset-liability approaches in our strategy definition process.

5  All speeches are available online at www.bankofengland.co.uk/speeches  5  References Bank of England (2018), Financial Policy Committee statement from tis meeting, 12 March 2018, available at: https://www.bankofengland.co.uk/statement/fpc/2018/financial-policy-committee-statement-march-2018  Bank of England (2017a), Stress testing the UK banking system: 2017 results, 28 November 2017, available at: https://www.bankofengland.co.uk/stress-testing/2017/stress-testing-the-uk-banking-system2017-results  Bank of England (2017b), A blueprint for a new RTGS service for the United Kingdom, 9 May 2017, available at: https://www.bankofengland.co.uk/paper/2017/a-blueprint-for-a-new-rtgs-service-for-the-uk  Carney, M (2018), The Future of Money, 02 March 2018, available at: https://www.bankofengland.co.uk/speech/2018/mark-carney-speech-to-the-inaugural-scottish-economicsconference  Central Banking (2018), Initiative of the Year, 23 Jan 2018, available at: https://www.centralbanking.com/awards/3333176/initiative-of-the-year-bank-of-englands-fintech-accelerator  Cunliffe, J (2018), Looking After our Money, 26 February 2018, available at https://www.bankofengland.co.uk/-/media/boe/files/news/2018/february/looking-after-our-money-speech-byjon-cunliffe.pdf George, E (1996), Risk Reduction in Payment and Settlement Systems’ a Bank of England Quarterly Bulletin article, 9 December 1996, available at: https://www.bankofengland.co.uk/-/media/boe/files/quarterlybulletin/1996/risk-reduction-in-the-payment-and-settlement-systems.pdf Hauser, A (2017) The Bank of England’s FinTech Accelerator: what have we done and what have we learned?, 6 October 2017, available at https://www.bankofengland.co.uk/speech/2017/the-boes-fintechaccelerator-what-have-we-done-and-what-have-we-learned  HM Treasury (2018), Fintech Sector Strategy, 22 March 2018, available at: https://www.gov.uk/government/publications/fintech-sector-strategy  HM Treasury (2017), Remit and recommendations for the Financial Policy Committee, 8 March 2017, available at: https://www.bankofengland.co.uk/-/media/boe/files/letter/2017/chancellor-letter-080317fpc.pdf?la=en&hash=7B99B9B412E160F79FB2411F26A10F282FDC7BB6  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Ramsden, D (2018), ‘The UK’s productivity growth challenge’, 23 February 2018, available at: https://www.bankofengland.co.uk/speech/2018/dave-ramsden-panel-remarks-cbi-event  7  All speeches are available online at www.bankofengland.co.uk/speeches  7