Speech  Embargo 29 March 2022, 6.30 pm  Macroprudential policy beyond the pandemic: Taking stock and looking ahead International Center for Monetary and Banking Studies  Fritz Zurbrügg Vice Chairman of the Governing Board* Swiss National Bank Geneva, 29 March 2022  ∗  The speaker would like to thank Angela Abbate for her support in preparing this speech. He also thanks Toni Beutler, Robert Bichsel, Maja Ganarin, Jacqueline Thomet and Martin Straub, as well as the SNB Language Services. Dear Professor Panizza, Ladies and Gentleman Thank you, Professor Panizza, for inviting me to participate in the public lecture series organised by the International Center for Monetary and Banking Studies (ICMB) in Geneva. It is a pleasure to be here again, particularly since this is the first lecture after a two-year pandemic-related break. While the effects of the pandemic appear to have subsided, we are currently experiencing another tragic development. I am deeply troubled by Russia’s war on Ukraine and want to express my heartfelt sympathy to the Ukrainian people. In my remarks this evening, I will be talking about macroprudential policy and rising challenges to financial stability, two topics that remain very relevant today. In recent months, policymakers in Switzerland and abroad have left the phase of accommodative macroprudential policy behind. Many jurisdictions have rolled back the easing of bank capital requirements that took place during the pandemic. Furthermore, several countries have actually taken steps to tighten macroprudential policy. What is behind this shift?

In the GFC’s aftermath, as the costs of ignoring the build-up of systemic risks became painfully clear, national regulators and international institutions joined forces to build the foundations of our current macroprudential frameworks. These comprise two types of policy. First, policies that aim to contain the build-up of vulnerabilities, for instance by reducing 1  Cf. Jordà, O., M. Schularick, and A. M. Taylor (2015), Leveraged bubbles, Journal of Monetary Economics, vol. 76(S): 1-20, and Jordà, O., M. Schularick, and A. M. Taylor (2015), When Credit Bites Back, Journal of Money, Credit and Banking, 45: 3-28.  excessive credit growth and bank leverage, or by improving the average quality of bank assets. Second, and absolutely essential in my view, policies designed to strengthen banking sector resilience. By this, I mean ensuring that the banking sector has enough capital to absorb losses that could materialise in a crisis, and is able to continue to provide financial services to the real economy without the need for government intervention. It is important to remember that macroprudential policy cannot always prevent financial crises. Rather, by pursuing its objectives and in particular by ensuring banking sector resilience, macroprudential policy should reduce the likelihood of financial crises occurring, and limit the extent and duration of recessions if a crisis occurs. Ensuring resilience is particularly important in Switzerland, given the large size of the Swiss banking sector relative to the size of the economy – also by international standards – and the dominant role played by a small number of banks.