valuable attribute. central banks, as well, value the importance of credibility and trust. allow me a few minutes to explain why these qualities are important to the national bank. at the same time, they can provide a good illustration as to why these same qualities are equally important for the private sector. let me begin with what i mean by trust. trust is a term that is closely related to confidence and credibility. trust is understood to mean when individuals share a mutual understanding that the rules of conduct governing their network work well and make things better for everyone. trust can therefore be thought of as a kind of social capital - a shared asset that benefits everyone. just as we speak about trust between individuals and public institutions, the same is true for publicly traded firms that interact with markets. with trust, economic systems and networks are more efficient for less effort is spent on monitoring and checking. with the establishment of trust, confidence is developed. over time, as trust is built up, confidence and credibility are developed. maintaining price stability is a key trust - building responsibility of the swiss national bank. protracted changes in the price level, as a rule, stem from a malfunctioning of the monetary system. price stability is important particularly because relative prices in our market economy govern the production and consumption of individual goods. changes in the price level are liable to give misleading signals and lead to expensive mistakes in planning and investment. inflation has other dire consequences. for the less fortunate - those unable to protect themselves against price increases - inflation means an erosion in purchasing power. this is especially true for fixed income investments. in contrast, for those that can protect themselves against inflation, it means that considerable resources are squandered in trying to hedge against inflation. these efforts should be put to more productive use. with price stability and trust in place, the list of economic benefits is long. in particular, the price development becomes more stable and predictable. this allows financial markets and businesses to operate more efficiently. as for the national bank, it can conduct monetary policy more easily with expectations strongly anchored. a key feature of trust is that it must be underpinned by transparency. we too have learned from past experience that swiss monetary policy gains from increased transparency. earlier than most central banks, we have embraced the notion that it is better for the conduct of monetary policy if people can understand what their central bank is thinking, doing and why. transparency also eliminates the doubts that the central bank is working with an informational advantage

institutions, a resilient economy, and a first - class financial sector. my first chart shows the interest rates of german and swiss ten - year government bonds. the orange area indicates the interest rate differential. as central banks around the world fought to mitigate the worst effects of the global financial crisis, short - term interest rates in many advanced economies fell towards zero. importantly, foreign interest rates, including those in germany, have fallen more sharply than those in switzerland. as a result, switzerland ’ s interest rate differential had practically disappeared, making swiss franc investments more attractive than comparable investments in other currencies. by lowering the interest rate on sight deposits into negative territory, the snb restored the traditional interest rate differential to more normal levels, as illustrated by the orange area in the chart. the snb ’ s willingness to intervene in foreign exchange markets a higher interest rate differential reduces the relative attractiveness of the swiss franc. however, financial markets may be exposed to a sudden increase in volatility, which could lead to a sharp rise in the demand for swiss francs. this is where our willingness to intervene in the foreign exchange market plays a crucial role in stabilising the markets. for example, this summer, when the greek government announced a referendum on the international bailout programme, we intervened in the forex market at a time of great market volatility and global uncertainty. this willingness to intervene in the forex market as required is a key pillar of our monetary policy. the size of the snb ’ s balance sheet reflects our monetary policy measures. one consequence of a larger balance sheet is larger fluctuations in the financial results. in the first three quarters of this year, the snb incurred a provisional loss of chf 34 billion, predominantly reflecting valuation effects following the discontinuation of the minimum exchange rate. this is shown in chart 2. it is still too early to draw conclusions for the 2015 year - end result, particularly in the current volatile international environment. let me be clear, however : it is not the purpose of the snb to generate and distribute profits. instead, the snb ’ s main concern is to conduct a monetary policy that serves the interests of the country as a whole. our monetary policy operations have a direct impact on the snb ’ s balance sheet, meaning that substantial losses may occur in individual years. significantly, bis central bankers ’ speeches however, in the long term, our financial results should be positive, thanks to our