Just as important is how these rules are put into practice. In normal circumstances, such as those before the crisis, this is a rather easy task, since the public and politicians understand “conventional” monetary policy quite well. People have a clear picture of how central banks act and communicate. In such times, the requirements of accountability and transparency are satisfied without undue controversy through a number of measures, namely, the annual accountability report submitted to parliament, regular  4  Cf. the National Bank Act (NBA) and Message concerning the revision of the National Bank Act. Functional independence means, in particular, that the SNB fulfils its mandate without seeking or accepting instruction from any of these bodies. Financial independence includes both the budgetary autonomy of the SNB and the prohibition against granting loans to the Confederation, thereby barring the state from using the banknote press. The SNB’s independence in personnel issues, finally, is ensured by the fact that Governing Board members and their deputies can only be dismissed during their term of office if they no longer fulfil the requirements for exercising that office or if they have committed a grave offence. 5  Specifically, art. 99 of the Federal Constitution states that “as an independent central bank, the Swiss National Bank shall follow monetary policy which serves the general interest of the country; it shall be administered with the cooperation and under the supervision of the Confederation.” Art. 5 of the NBA sets out in detail the SNB’s constitutional mandate.

In addition, global interest rates have fallen to near zero levels, virtually eliminating any interest rate differential, and thus further reducing the incentives for Swiss investors to re-export their excess savings abroad. Together, these developments largely explain the observed net inflows of private capital to Switzerland since the crisis, and, despite them being compensated by public sector capital exports through foreign exchange interventions by the SNB, the persistent strength of the Swiss franc. These developments also highlight a first key fact of Swiss monetary policy: At any point in time, the attractiveness of the Swiss franc for both domestic and foreign investors is predominantly determined by the size of the interest rate differential and the safe haven status, with the latter being particularly important in times of heightened uncertainty. In the current global environment of low interest rates, imposing negative rates is therefore a monetary policy necessity in order to re-establish a material interest rate differential vis-à-vis the major economies. The negative rate thus contributes to restoring the relative attractiveness of foreign currency investments for Swiss investors and corporates. At the same time, it reduces the incentive for foreign investors to invest in Swiss franc-denominated assets. Over time, this fundamental mechanism will contribute to reducing the current overvaluation of the Swiss franc. The SNB is fully aware that, despite its established necessity, a negative interest rate policy does not come without detrimental side effects, notably for financial stability and the efficient use of capital, to name just two areas of concern.