In a crisis there should not be any need for systemically important banks to be bailed out by the state. Monetary policy and macroprudential measures are closely linked. Sometimes monetary policy demands a low policy interest rate in order to ensure price stability and support economic activity, especially if the Swiss franc is overvalued. However, low interest rates can translate into a build-up of imbalances on the mortgage and real estate markets. To increase banks’ resilience to the correction of these imbalances, macroprudential measures are needed. The countercyclical capital buffer, for which the SNB may propose changes, is one such measure. Stability: a long-term asset with potential short-term costs Ladies and Gentlemen, price stability and financial stability are indeed important long-term assets for the financial sector and the entire economy. As an independent central bank with its own currency, the SNB has been successful in providing long-term stability. Switzerland has had significantly lower and more stable inflation rates than most other countries (cf. chart 2). Our long history of price stability, a reliable political and legal environment, and efficient institutions have resulted in an interest rate bonus. This is more pronounced for the long-term part of the yield curve than for the short-term part. Ten-year government bond yields have typically been lower in Switzerland than in Europe and the US. In addition, having its own currency plays an important role in Switzerland’s attractiveness. It makes it possible for us to conduct our own monetary policy, with monetary conditions adapted to the Swiss economy.

The Swiss franc remains significantly overvalued. The financial sector has also suffered from the effects of the recent crisis on Switzerland and its currency. For instance, the current account shows that exports of banking commissions have diminished markedly since the financial crisis. Indeed, the entire Swiss economy has had to adapt to new international monetary conditions. At the SNB we have geared monetary policy towards this new and difficult situation. 6  Swiss Bankers Association, Banking Barometer, September 2015. 7  BIS Triennial Central Bank Survey 2013. 8  Full-time equivalents. 9  Cf. Final report of the group of experts for the further development of the financial market strategy, dated 1.12.2014; Annex to the Review of the Swiss TBTF regime by international standards – Basis for an evaluation in accordance with Article 52 of the Banking Act, p. 55. 4  BIS central bankers’ speeches  Monetary policy during the financial and European debt crises The Swiss economy is currently being hit by external shocks. In such a context, the SNB aims to dampen short-term costs without jeopardising the long-term goals of monetary policy. The challenge for monetary policy in recent years has been to react to sudden developments in international markets and geopolitical risks that have endangered Switzerland’s real economy and price stability in the medium term. The goal has been to steer policy responses in a way that reduces short-term costs while preserving the stability achieved over the past four decades of independent monetary policy.