about counterparty risk, they became less willing to lend, especially on the unsecured money market, at maturities longer than a few days. as a central banker, i would date the outbreak of the financial market crisis to the beginning of august, when overnight interbank rates increased sharply. the first central banks to react were the ecb and the snb on 9 august, when both banks conducted extraordinary finetuning operations. soon afterwards, other central banks followed suit, also injecting additional liquidity. for a discussion of the transmission of monetary policy to financial markets see ph. hildebrand ( 2006 ), “ monetary policy and financial markets ”, speech given to the annual conference of the swiss society for financial market research, 7 april 2006, or th. j. jordan ( 2007 ), “ globalisierung und finanzmarkte : herausforderungen und chancen ”, speech given at the eth zurich, 13 november 2007. of course, to retain credibility, the central bank must refrain from deceiving the markets, i. e. from announcing future action without actually intending to act. as measured by the case shiller composite index. so far, there have been three waves of money market strains. after subsiding somewhat in late september, the strains increased again in november, exacerbated by year - end pressures. the third wave started in march. the worst peak of the financial market crisis so far was attained in mid - march, when bear stearns was taken over by jpmorgan. the takeover, which was facilitated by the federal reserve, resulted in a calming of markets. since mid - march, financial markets have improved somewhat, with the exception of money markets, which are still rather tense. 4. action by central banks i would now like to discuss in more detail the ways in which central banks reacted to the financial market crisis. given that operational frameworks differ from one central bank to another, and given the highly technical nature of the subject, i will restrict myself to some stylised facts relating to the actions taken by central banks in general and those taken by the swiss national bank in particular. central banks responded to the financial market turmoil gradually, by progressively shaping and expanding their instruments. at the outset, central banks tried to counter rising shortterm money market rates by applying their existing instruments in a more flexible way, by adjusting the size, frequency, and the conditions of their discretionary open market

jean - pierre roth : real estate crisis in the united states – similar risks in switzerland? summary of a speech by mr jean - pierre roth, chairman of the governing board of the swiss national bank and chairman of the board of directors of the bank for international settlements, at the banque cantonale vaudoise, lausanne, 9 june 2008. the complete speech can be found in french on the swiss national bank ’ s website ( www. snb. ch ). * * * in the past few months, developments in the mortgage and real estate markets have attracted increasing attention. europe, and switzerland in particular, have been indirectly affected as a result of commercial bank activities in us mortgage markets. over the past few quarters, the european real estate market has also been affected, with a number of countries experiencing a downturn in prices similar to that in the united states. by contrast, other countries, such as switzerland, have seen real estate prices rising at a steady pace. in some respects, what the united states went through is a classical property crisis of the type that switzerland experienced in the early 1990s. however, the us real estate crisis spilled over to encompass the international financial markets, endangering their stability and prompting the intervention of several central banks. these events confirm the importance of sound real estate market developments for the economy. it is important to recognise that the swiss mortgage and real estate markets are very different from their us counterparts. developments in the swiss housing market have been relatively steady, despite the strong demand pressures discernible in certain regions. at present we do not detect any obvious signs of a speculative bubble that might culminate in a sudden fall in prices. the main explanations for the rise in real estate prices in the past few years have been higher expectations and good financing conditions. around lake geneva the pressures on the limited available space and the fast growth in the residential population have acted as special stimulants. thus there have been no speculative developments as witnessed at the end of the 1980s. now that the business cycle has peaked in switzerland, it is very likely that we will move into a phase of more moderate price increases.