These distortions can partially be put down to the ownership structure of listed multinational companies headquartered in Switzerland, and also to the traditionally lower rates of inflation in Switzerland compared to other countries. Chart 5 illustrates the overstatement of the current account surplus based on these two distortions. The distortions shown here are calculated using internal SNB estimates. These estimates are valuable pointers to understanding and analysing Switzerland’s current account. The first distortion is attributable to Switzerland being a location for multinational companies. For the size of the country, an above-average number of multinationals – that is to say, large companies listed on the stock exchange with extensive activities throughout the world – are headquartered in Switzerland. A substantial percentage of these companies are held in free float by foreign investors. This kind of ownership structure can lead to an overstatement of the current account balance when compiling the balance of payments and international investment position according to the IMF guidelines. This is particularly the case when such foreign-controlled companies reinvest substantial portions of their earnings instead of distributing them as dividends. 6 These savings by multinational companies are allocated entirely to Switzerland although a large proportion actually belongs to foreign investors. The extent of this distortion can be seen from the red bars in chart 5. While the contribution of the red bars fluctuates considerably, on average it is firmly in positive territory and explains a substantial part of the Swiss current account surplus.

Several years ago, most major investors were investing in Asia but based thousands of miles away. Today, many investors are realising that a ground presence in this time zone is necessary. The rapid structural changes of economies in Asia, the differences in the stages of economic development, in political systems, regulatory regimes and corporate governance standards mean that investors must not only understand the differences within Asia, but they have to be able to respond to swift changes in outlook, and to take into account ongoing structural changes in their assessments. In short, the ability to distinguish noise from trend is essential. Having the right risk mindset 14. Apart from responding to policy reforms and initiatives, investors and financial institutions will do well to continuously rethink and challenge the fundamental tenets of their investment and risk management tools and methodologies. To do so, it is imperative for investors to have the right risk mindset. 15. We should put once-neglected risks, such as counterparty credit risk, model risk, liquidity risk and technology risks, at the forefront of risk considerations. We have to be  BIS central bankers’ speeches  3  mindful that falling back on historical experience may not necessarily provide the guidance especially when developments are unprecedented. In this regard, boards of financial institutions play a vital role in driving the level of risk consciousness in their institutions and exercising effective risk management oversight.