The SNB therefore continues to monitor events on the foreign exchange markets very closely. Impact of negative interest on the money and capital markets  Let me now turn to the impact of negative interest on sight deposits at the SNB on the Swiss franc money and capital markets. As you know, since the introduction of the negative interest rate in January 2015, key money market rates such as the three-month Libor have hovered, as intended, around –0.75% (cf. chart 4). The negative interest rate has ensured that the traditional interest rate differential with other currencies has been at least partially restored. On the secured money market – the repo market – interest rates have also stabilised at a lower level. This applies in particular to SARON, the reference rate for call money. Activity on the  Page 2/7  Berne, 15 December 2016 Andréa M. Maechler  News conference  repo market remains unaffected by negative interest and the very high level of sight deposits. Banks and insurance companies use the market for their short-term liquidity requirements and the efficient management of their collateral holdings. The introduction of the negative interest rate even resulted in an increase in the trading volume on the repo market (cf. chart 5). One reason for this is that repo trades can be conducted in order to use up exemption thresholds. Yields on Confederation money market debt register claims are below interbank levels (cf. chart 4). This is mainly attributable to relatively high investor demand for safe Swiss franc investments.

On the foreign exchange swaps market, where currencies are exchanged on a temporary basis, implied interest rates for Swiss franc investments lie well below –0.75%; this applies in particular to US dollar swaps. The reason for this is abundant Swiss franc liquidity as well as structurally high demand for US dollar funding in the international financial system. These factors lead to a relative oversupply of Swiss francs against the US dollar, which depresses implied Swiss franc interest rates in the foreign exchange swap market. This makes it more expensive for the relevant investors to hold Swiss francs, on top of the negative interest rate of –0.75%. Yields on long-term Confederation bonds on the capital market likewise fell substantially following the introduction of the negative interest rate. The interest rate rise observed since mid-year on longer-term securities in Switzerland took place in parallel with international interest rate developments. Since, at the same time, money market rates remained stable, this resulted in a slightly steeper yield curve for Swiss franc investments, which also mirrored international developments. Overall, negative interest is having the expected impact on the money and capital markets and is making it less attractive for investors to hold Swiss francs compared to other currencies. Reform of benchmark interest rates  To conclude, I would like to talk briefly about ongoing interest rate benchmark reforms. In 2014, the Financial Stability Board (FSB) recommended strengthening the existing global interest rate benchmarks, in particular the Libor. It also called for the development of alternative benchmark rates.