foreign exchange markets, with some others even resorting to restrictions on the movement of capital flows. the result has been a global rise in foreign exchange reserves. indeed, they have almost doubled in the past four years ( cf. chart 2 ). the high level of foreign exchange reserves ultimately reflects substantial global economic imbalances. as we know, the swiss franc also appreciated substantially in the wake of the financial crisis. looking at how the swiss franc ’ s real and trade - weighted external value has changed over the long term ( cf. chart 3 ), we can see that, historically, periods of swiss franc strength have alternated with periods of weakness. the fact that the current swiss franc strength is proving particularly burdensome for the swiss economy is due partly to the rapidity of the appreciation, but also to the uncertain economic climate. diversification of foreign exchange reserves as you will be aware, our foreign exchange interventions since march 2009 have resulted in the snb ’ s foreign exchange reserves expanding to over chf 200 billion. as we were primarily buying euros, euro holdings accounted for 70 % of foreign exchange reserves at one point. in the meantime, we have reduced the euro ’ s share in the foreign exchange reserves substantially, to 55 %. moreover, we have diversified foreign currency risk further by investing for the first time in australian and singapore dollars, as well as swedish kronor and danish kroner. together, these currencies make up 3 % of the foreign exchange reserves. the majority of non - euro holdings continues to be in us dollars ( 25 % ), japanese yen ( 10 % ), canadian dollars and pounds sterling. finally, we have increased the proportion of the foreign exchange reserves that is made up of equities, from 4 % back to 10 %. this comprehensive repositioning was carried out gradually, and the market had no problem in absorbing it. we were thus able to considerably reduce the risk concentrations in the foreign exchange holdings. an examination of further diversification measures forms part of our annual investment strategy formulation process. normalisation of the swiss franc money market the effect of the monetary policy crisis measures introduced in recent years was also felt in the area of monetary policy implementation. by buying foreign currency against swiss francs, we created a structural liquidity surplus on the swiss franc market. we have since largely reabsorbed this excess liquidity via a set of instruments that are already well established. liquidity is absorbed, on the

jean - pierre danthine : swiss monetary policy and target2 - securities introductory remarks by mr jean - pierre danthine, member of the governing board of the swiss national bank, at the end - of - year media news conference, zurich, 16 december 2010. * * * my remarks today will focus on three topics. i will start by looking at the situation on the international financial markets. i will then speak about the snb ’ s own financial market activities in connection with the two core tasks of monetary policy implementation and foreign exchange reserves management. finally, i would like to briefly discuss the planned paneuropean securities settlement system, target2 - securities. international financial markets the situation on the international financial markets reflects the gradual global economic recovery. at the same time, these markets continue to be affected by the fallout from the financial crisis and by doubts as to whether the current global economic recovery will be robust enough to reduce the existing financial imbalances. on the stock markets, volatility has trended downwards over the past half - year, but has remained high. shares and corporate bonds have benefited from investors ’ growing risk appetite, the ongoing expansionary monetary conditions and good corporate results. on the bond markets, by contrast, uncertainty has, if anything, grown. with the global economic recovery, yields on long - term government bonds have picked up from their low levels. in europe risk premia for heavily indebted sovereigns have risen markedly. the imbalance in many government budgets has taken problematic proportions. wide - ranging cuts have been announced in the affected countries, and international rescue packages have been put together, first for greece and latterly also for ireland, in order to prevent the situation from escalating. the markets will, however, be monitoring the effectiveness of the announced cuts and support measures very closely. the problem of sovereign indebtedness in europe remains a source of considerable uncertainty. a high level of uncertainty also remains on the foreign exchange markets. the continuing high volatility is coupled with strongly divergent exchange rate developments. over the last few years, a number of currencies have appreciated substantially against the two major world currencies : the euro and the us dollar ( cf. chart 1 ). these currency shifts do not just negatively affect the export capability of the countries whose currencies have appreciated ; they also have a heavy impact in monetary terms. this is because, in order to keep appreciation in check, some countries have intervened in the