On a deeper level, this conclusion is based on the recognition that, from a welfare perspective, a “leaning against the wind” policy would clearly be dominated, by instruments which target the root causes of those problems generated by excessive risk-taking in times of low interest rates. BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  References Altunbas, Yener, Leonardo Gambacorta and David Marqués-Ibáñez. 2010. Does monetary policy affect risk-taking. European Central Bank Working Paper, No. 1166, 11 March 2010. Angeloni, Ignazio, Ester Faia and Marco Lo Duca. Monetary policy and risk-taking. 2010. Bruegel Working Paper 2010/00, February 2010. Assenmacher-Wesche, Katrin and Stefan Gerlach. 2010. Monetary policy and financial imbalances: facts and fiction. Economic Policy, Volume 25, Issue 63, Pages 437–482, July 2010. Bean, Charles, Matthias Paustian, Adrian Penalver and Tim Taylor. 2010. Monetary policy after the fall. Paper presented by Mr. Charles Bean, Deputy Governor of the Bank of England at the Federal Reserve Bank of Kansas City Annual Conference, Jackson Hole, Wyoming, 28 August 2010. Bean, Charles. 2006. Impact of globalisation on monetary policy: commentary. Proceedings. Federal Reserve Bank of Kansas City. pp. 307–313. Bernanke, Ben. S. 2010. Monetary policy and the housing bubble. Speech at the Annual Meeting of the American Economic Association, Atlanta, Georgia. 3 January 2010. Borio, Claudio. 2011. Anchoring countercyclical buffers: the role of credit aggregates. Bank for International Settlement Working Paper, No.

Indeed, the SNB’s position is particularly challenging as the Swiss economy is small and open, which potentially makes it more vulnerable to any negative fall-out which may stem from the trade-off associated with policies which “leanagainst-the wind”. As the current situation of the Swiss economy makes all too clear, the impact of a high interest rate policy on the exchange rate would surely increase the associated output loss. It is therefore crucial that the Swiss authorities implement the most cost-effective measures to counter the financial excesses which may lead to a crisis. Indeed, the Swiss authorities are currently pursuing a comprehensive agenda of macroprudential measures. From a structural perspective, in 2011 the Swiss Parliament passed a package of measures aimed at reducing the systemic impact of potential failure of those institutions classed as “too big to fail”. These banks will now be asked to retain extra capital reserves. They will also be required to improve their liquidity positions, diversify their risks and propose a scheme by which they will ensure the continuation of their systemically important functions, should they find themselves in financial difficulty. This new regulatory regime will come into force on 1st January 2013, pending approval of the associated directives by Parliament. Second, after a round of consultations that just ended, the Federal Council is soon expected to decide upon a proposal to introduce a new risk-weighting system for mortgage-related assets.